Downgrades

* Sandler O'Neill & Partners LP analyst Frank Schiraldi downgraded Northwest Bancshares Inc. and Peapack-Gladstone Financial Corp., based on valuation.

Schiraldi noted the recent increase in banks' stock prices because of the regulatory environment expected under President-elect Donald Trump's administration. The analyst added that "dramatically scaled-back banking industry regulation, lower corporate tax rates and an improved interest environment" could help the banks significantly boost their earnings. However, in certain cases, he thinks the valuations don't match the potential benefits.

The analyst lowered his investment rating for Northwest Bancshares to "sell" from "hold" but increased his 12-month price target to $17 from $16. Schiraldi noted that the company's stock price has increased significantly since the presidential election Nov. 8. The company is trading at 2.3x tangible book value per share and 19x his 2017 EPS estimate, compared to peer valuations of 1.88x tangible book value per share and 18x 2017 EPS estimates. Schiraldi does not think the company merits a premium valuation because of its growth profile in the current environment.

Schiraldi downgraded Peapack-Gladstone to "hold" from "buy" but increased his 12-month target price to $32 from $25. The analyst noted that the company stock has outperformed since Nov. 1. Peapack-Gladstone is trading at 170% of tangible book value, compared to 120% of tangible book value in early November. Schiraldi added that the company shares have significantly appreciated, with a return of 45%, compared to 26% for the Nasdaq bank index, since Nov. 1. He thinks company shares are fairly priced given the company's profitability profile.

Industry note

* Stephens Inc. analyst Terry McEvoy also revised his outlook on the banking sector following the recent shift in investor sentiments. He noted that the change seems sustainable, rather than a "temporary bounce." However, he emphasized that the market performance is reflecting the "big picture" as there is not much information available on expected policy and regulatory changes.

Based on his revised outlook for superregional banks, McEvoy downgraded KeyCorp to "equal-weight" from "overweight" and upgraded Comerica Inc. to "overweight" from "equal-weight." In addition, he rescinded his price target of $16 for KeyCorp and established a price target of $76 for Comerica. Following his analysis, the analyst thinks Comerica will derive the most benefit from possible regulatory changes, whereas KeyCorp was among the lowest-ranked for such benefit.