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Sandler O'Neill upgrades Community Trust Bancorp, WesBanco Inc.


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Sandler O'Neill upgrades Community Trust Bancorp, WesBanco Inc.


* Sandler O'Neill & Partners analyst Stephen Scouten upgraded Community Trust Bancorp Inc. to "hold" from "sell" and maintained his 12-month price target of $44.50.

In January, Scouten downgraded the Pikeville, Ky.-based company because he thought its share price was increasing "too fast for a bank with minimal loan growth and a neutral balance sheet" at the time.

However, due to the 11% year-to-date decline in the company's shares, the analyst said the company's valuation is now justified, trading at around 14.5x the 2018 earnings estimate.

* Analyst Casey Whitman of Sandler O'Neill & Partners also upgraded Wheeling, W.Va.-based WesBanco Inc. to "buy" from "hold" and lowered her 12-month price target to $42 from $44.

The upgrade comes due to the underperformance of the company's shares, which are down 16% year-to-date as compared to a 5% slide in the Nasdaq Bank Index.

The analyst also noted that the shares are trading at a discount to peers on the basis of tangible book value as well as earnings. However, Whitman said the shares should be trading nearer to peers because the company has solid profitability, potential for M&A, and a good dividend yield.

* Based on valuation, Hovde Group analyst Brian Zabora upgraded Louisville, Ky.-based Republic Bancorp Inc. to "outperform" from "market perform."

According to the analyst, shares of the company are down 14% so far this year and are trading at a discount compared to peers, at 1.21x tangible book value and 13.2x 2018 EPS estimate. He said that although a discount is warranted, the current discount on the company's stock is "too great."

That discounted valuation and the underperformance represent an attractive risk/reward opportunity, according to Zabora, who maintained his $39 price target.

* Nomura analyst Bill Carcache upgraded Capital One Financial Corp. to "buy" from "neutral" and increased his price target to $105 from $97.

Carcache noted that the McLean, Va.-based company stands out as the only major issuer to increase its subprime loans since 2011. He wrote that while the industry retreated from subprime lending, the company quietly expanded its market share. The company's bet on subprime loans, he said, is "about to pay off, handsomely."

The analyst also projected an increase in the company's net income and EPS, with continued high-single-digit card loan growth. Specifically, Carcache predicts that the company will experience double-digit growth in its EPS in 2017 and 2018, with or without Donald Trump's promised deregulation and tax cuts.

* Compass Point Research & Trading analyst Scott Valentin upgraded Fifth Third Bancorp to "buy" from "neutral" after the recent bank sell-off. He also increased his 12-month price target to $29 from $28.

The analyst noted that under the company's 2017 Comprehensive Capital Analysis and Review, its payout ratio can approach or even exceed 100%. He projected the current payout ratio to be around 82%, including TRA after-tax gains for repurchases.

The analyst also said the company would significantly benefit from any deregulation and possible tax reforms expected from President Donald Trump, as it is situated in the "regulatory sweet spot."

Also, following the appointment of Howard McClure as senior vice president and head of insurance services in 2016, the analyst projected that Fifth Third will acquire two or three insurance agencies per year over the coming years. He said this will help the company build its insurance unit, deriving benefit for its noninterest income.

* Valentin also upgraded Zions Bancorp. to "buy" from "neutral" and maintained his price target of $47.

The analyst said the Salt Lake City-based company is well-positioned to gain from possible tax reforms and a slow-rate-increase environment, based on its significantly asset-sensitive balance sheet.

Valentin also noted that the company's shares are down 14% from its 52-week high of $48.33, while the SPDR S&P 500 Regional Bank ETF is down 10% from its peak, offering an attractive entry point to potential investors for Zions stock, as compared to other regional banks.