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Raymond James adjusts bank stock ratings ahead of Q3 earnings

Downgrades

Sandler O'Neill & Partners LP analyst Jeffery Hartedowngraded JPMorgan Chase &Co. to "hold" from "buy" based on valuation. Henoted that the company, though attractively valued, is trading at a premiumbased on next-12-months price-to-earnings and price-to-tangible book value.Harte believes investors can gain more "bang for the buck" by buyingcheaper and less widely owned universal bank stocks like and


Stephens analyst Terry McEvoy lowered to "equalweight" from "overweight" after recent outperformance, andsuggested investors "move into KeyCorp." McEvoy believes Fifth Third's stake inVantiv Inc. is now"largely reflected" in its valuation. He raised his price target forKeyCorp, as well as those for Citizens Financial Group Inc., and , all rated at "overweight." The increased pricetargets are a result of Stephens modeling 2017 and 2018 operating EPS growth of14% and 12%, respectively.


Raymond James analysts adjusted their ratings and estimatesahead of third-quarter earnings releases.

Michael Rose lowered Regions Financial to "outperform"from "strong buy" based on its recent outperformance in the stockmarket during the third quarter. He noted that the company stock priceincreased 16.0% compared to a 3.3% increase in the S&P 500 and a 9.3% risein the KBW Nasdaq Bank Index.


David Long lowered his investment rating for to "marketperform" from "strong buy," after the company's stock priceincreased 20% compared to a 6% increase in the KBW Nasdaq Bank Index and a 5%gain in the S&P 500, since its last upgrade in May. The analyst noted thatthe recent increase in oil prices and net interest margin expansion drove theincrease in stock price. He expects the company to maintain its margin betterthan its peers given the excess liquidity deployment, however he does not see anear-term catalyst to drive share prices higher.


Raymond James lowered Park Sterling Corp., First Financial Bancorp. and to"market perform" from "outperform," based on the recentappreciation in their stock prices. The firm believes the companies' currentvaluations appropriately reflect their risk/reward profiles.


Rose downgraded BancorpSouth Inc. to "underperform" from"market perform." The analyst thinks the bank's pending exam anduncertainty surrounding the completion of its acquisitions of andCentral CommunityCorp. will limit any upside in the company's stock price in thenear term. Rose lowered the 2017 EPS estimate to $1.70 from $1.75.

Upgrades

Raymond James upgraded United Community Banks Inc. and PNC Financial Services.

United Community Banks was upgraded to "strongbuy" from "outperform" with a price target of $24. Rose believesthe company has potential for multiple expansion after the third quarter,following the TidelandsBancshares Inc. acquisition. In addition, they noted the company'scontinued progress towards its goal of 1.1% return on assets by the end of2016, better-than-peer loan growth and improved efficiency ratio.


Rose upgraded PNC Financial Services to "marketperform" from "underperform." The analyst thinks the"negative EPS revision cycle" has probably "hit an inflectionpoint." He noted that the company's management expects more cost savings,better consumer loan growth and positive operating leverage.

Initiations

Piper Jaffray analyst Nathan Race initiated coverage ofGreat Western BancorpInc., TCF FinancialCorp., QCR HoldingsInc., HorizonBancorp and FirstFinancial Bancorp..

The analyst initiated Great Western at "neutral"and a 12-month price target of $35. Race noted that although the company iswell-run, with a "best-in-class efficiency ratio," the lack ofclarity on how the current agricultural downturn will impact the bank preventshim from being more positive on the stock, given the company's"well-above-average" exposure to the sector.


Race initiated TCF Financial at "neutral" with a$15 target price. He noted that the negative factors surrounding the companyoutweigh the potential positive catalysts. The company's price target reflectsa discount compared to peers, based on its below-average asset quality andefficiency metrics, its CFPB-related issues, and the volatility in the company'sfee income tied toconsumer real estate and auto loan sales. Race listedthe company's niche market, above-average diversified revenue and high-yieldinglending segments as positives for the company.


QCR Holdings was initiated with an "overweight"rating and $36 price target. Race believes the bank's infrastructure issufficient to allow it to approximately double in size to $7 billion in assets.He said QCR Holdings is well-positioned as an acquirer of choice and hasabove-average organic growth prospects. He projects 10% to 12% organic loangrowth "over the next several quarters," that should drive above-peerEPS growth.


The analyst initiated Horizon Bancorp at"overweight" with a 12-month price target of $33.50. Race believes thecompany's recent acquisition of La Porte Bancorp Inc. has provided significant cost-cuttingopportunities and increased scale, which will help it generate a return onassets of more than 1.05% in 2017. In addition, he thinks the company willremain "an acquirer of choice" and the recent increase in its stockprice will "improve the economics of future deals."


Race initiated First Financial with a "neutral"rating and a 12-month price target of $23, reflecting a premium compared to itspeers, based on the company's above-average expected organic growth. Raceexpects First Financial to build its capital over the next several quarters, asthe company approaches the $10 billion threshold, to provide the managementteam additional flexibility.