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BMO downgrades BankUnited; Piper Jaffray upgrades Bank of the Ozarks

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BMO downgrades BankUnited; Piper Jaffray upgrades Bank of the Ozarks

Downgrade

BMO Capital Markets analyst Lana Chan downgraded Miami Lakes,Fla.-based BankUnited Inc.to "market perform" from "outperform" and cut her one-year targetprice to $35 from $40, citing concerns over the company's slower near-term loangrowth.

Chan reduced the company's 2016 and 2017 EPS estimates to $2.11and $2.50, respectively.

The analyst projects BankUnited's annual loan growth at $4 billion,lower than the company's target of $4.5 billion to $5 billion, but still strongaverage growth.

Chan noted the heightened regulatory scrutiny of banks with high concentrations ofcommercial real estate. Guidance from regulators states that banks may face increasedregulatory scrutiny if their CRE loans exceed 300% of risk-based capital, and Chan expects that BankUnitedwill cross that threshold sometime in the next year. She said that BankUnited'sexposure to industrywide CRE scrutinycombined with slower loan growth could limit upside to the company's shares.

The analyst did offer a positive note in her report: "Onthe other hand, once the enhanced risk procedures are put in place, BKU could alsobenefit from the pullback of the smaller banks in the New York market. And, managementdid guide for significantly higher loan growth following 1Q's soft quarter."

Upgrade

Piper Jaffray & Co. analyst Peyton Green upgraded LittleRock, Ark.-based Bank of the OzarksInc. to "overweight" from "neutral," noting valuationafter a "short-seller induced pullback" in the company's shares. He saidthe bank is trading at a discount to peers despite producing better returns andstronger projected EPS growth.

Muddy Waters founder Carson Block recently said that he the bank's stock, accordingto a report from The Wall Street Journal.

Green retained his target price of $46 and maintained his 2017and 2018 EPS estimates at $3.05 and $3.60, respectively.

Green expects that the pending acquisitionsof Atlanta-basedCommunity & Southern HoldingsInc. and Florida-based C1Financial Inc. will boost the bank's EPS by between 5 cents and 15 cents.

Notable reiterations

FIG Partners analyst Brian Martin maintained an "outperform"rating for Mattoon, Ill.-based FirstMid-Illinois Bancshares Inc. after it announced plans to Edwardsville, Ill.-basedFirst Clover Leaf Financial Corp.

Martin also retained his $30 price target. He raised his 2016core EPS estimate to $2.05 from $2.00, and increased his 2017 core EPS estimateto $2.21 from $2.10, citing the company's first-quarter results and the acquisition.

Martin called the First Clover Leaf deal a "positive" for the buyer, citinga reasonable price, increased opportunities for growth in St. Louis, reduced excessliquidity and complementary cultures that he expects will lead to a smooth integration.


BMO analyst Chan maintained an "outperform" ratingfor New York-based Signature Bankbut reduced her price target to $155 from $173. According to Chan, Signature Bankhas the highest CRE exposure out of all BMO-covered banks at 593% of risk-basedcapital. But she noted that the bank has been stress testing its portfolio for years."We believe the FDIC is comfortable with its risk procedures, its underwriting,and its capital," she wrote. "In addition, we actuallybelieve that it can benefit from some of the smaller players pulling back from themarket because of regulatorypressure."