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KBW downgrades United Financial Bancorp

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KBW downgrades United Financial Bancorp

Downgrade

* Collyn Gilbert of Keefe Bruyette & Woods downgraded United Financial Bancorp Inc.'s stock rating to "market perform" from "outperform." The price target for the Hartford, Conn.-based company was also lowered to $18 from $19.

The lowering of the rating, according to the analyst, is due to the company's below-peer profitability in the past six-plus years. The gap is expected to increase in the future, added Gilbert. The analyst sees few positive catalysts for the stock, given her earnings and profitability outlook. A sale, however, could value the franchise at $20 to $21 per share.

Industry reports

* Investors and attendees of the 39th Annual Raymond James Institutional Investors Conference seem less optimistic than anticipated about Dodd-Frank reform passing this year, according to Raymond James' analysts. The analysts added that despite consistent bipartisan support, any additional changes to the bill could delay its potential passage by a few months. The analysts, however, see a good chance of the bill being signed into law before the August congressional recess.

When asked about the areas of lending they were most concerned about, from a credit perspective, bank management teams identified retail and multifamily lending as the top two. In contrast, investors were most worried about auto and commercial real estate.

When asked about tax reform, approximately 31% of management teams believed its benefits will never be competed away, while 26% expect the positive impact to be competed away in three-plus years.

Raymond James analysts also described management teams' response to a question about what aspects of regulatory reform they think would have the most impact on the banking industry. The top answer was the removal of the Comprehensive Capital Analysis and Dodd-Frank Act stress-test scenarios for banks below $250 billion in assets.

* Piper Jaffray's Nathan Race remains wary of the growth of certain agricultural lenders under his coverage, particularly those with exposure across the Midwest.

The analyst noted that expectations of lower farm income and direct government payments will be only partly offset by potential factors such as global GDP growth and better clarity around the 2018 Farm Bill. Soybean and corn prices are up year-to-date, but hurdles to the profitability of the grain producers are likely to remain this year, resulting in limited credit extensions from Midwest commercial banks.