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Raymond James downgrades BofA, Wells Fargo, Umpqua Holdings

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Raymond James downgrades BofA, Wells Fargo, Umpqua Holdings

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Piper Jaffray analyst Kevin Barker upgraded to"overweight" from "neutral," citing the recent retreat inthe company's share price, but maintained his price target at $29.

His 2016, 2017 and 2018 EPS estimates are $1.89, $2.30 and$2.53, respectively.

He believes that the company's exposure to the energy sectoris dissipating as oil is now trading above $40 per barrel. In addition, thecompany's stock price is "more than reflecting" the effect of lowerrates on earnings.

Furthermore, over the past few quarters, the company haskept its expense base under control and reported meaningful loan growth afterthe company's charter consolidation. The analyst noted that the company is tradingat 85% of tangible book value, which he thinks will be very accretive as heexpects the company to start buying back stock for the first time after thefinancial crisis.

Downgrades

Goldman Sachs analyst Alexander Blostein downgraded Chicago-basedNorthern Trust Corp. to"neutral" from "buy" and also lowered his 12-month pricetarget to $71 from $82.

In addition, he reduced his 2016, 2017 and 2018 EPSestimates to $4.28, $4.68 and $5.45, from $4.43, $5.18 and $6.10, respectively.

He expects the company to continue to deliver strongerorganic growth among other trust banks. However, he believes that the currentweakness in the equity market and renewed pressure on rate hikes will likelystall the stock's positive EPS momentum. As the markets are not expecting anyrate hikes through 2017, the analyst thinks that the company's net interestincome growth will probably moderate. In addition, he noted that the companymight not be successful in driving down its expense-to-fees ratio in a downequity market, as it initially planned.


Prior to the second-quarter earnings season, Raymond Jamesanalysts downgraded Bank of AmericaCorp., Wells Fargo& Co. and UmpquaHoldings Corp.

Analyst Michael Rose downgraded BofA to "marketperform" from "outperform" and rescinded his 12-month pricetarget of $16.

He also reduced his 2016 EPS estimates to $1.26 from $1.30,to reflect the negative expected impact of FAS91, which covers accounting for nonrefundable fees and costs associatedwith originating or acquiring loans. However, he maintained his 2017 EPSestimate at $1.54.

The analyst noted that the company's favorable risk/rewardprofile is becoming less dynamic because of a flatter yield curve and continuedevidence of credit cycle turn, even though BofA is trading at a discount andshows better-than-expected capital return in its 2016 Comprehensive CapitalAnalysis and Review results. In addition, the analyst lowered his EPS estimatesbecause of a challenging backdrop in investment banking and fixed income, currenciesand commodities, which should be offset by strong mortgage results in thenearer term.


Analyst David Long downgraded Wells Fargo to "marketperform" from "outperform" and rescinded his price target of $54.

He also lowered his 2016 EPS estimates to $4.09 from $4.14and his 2017 EPS estimates to $4.35 from $4.43.

The analyst expects the company's net interest margin to bemore contracted than its peers, as the company keeps building its liquidity tocomply with TLAC. As a result, he is projecting negative operating leverage in2016. In addition, the analyst thinks that the company will not be able to showpremium price-to-earnings multiple, as he is expecting low single-digit organicrevenue growth.


Long downgraded Umpqua to "outperform" from"strong buy" and reduced the company's price target to $17 from $18.

He also reduced his 2016 EPS estimate to $1.14 from $1.17and his 2017 EPS estimate to $1.21 from $1.26.

"We remain bullish on the stock over the long termgiven its transformational acquisition of [Sterling Financial Corp.] should garner additionalinvestor interest over time and it is nearing a point of focusing efforts onorganic growth," Long wrote. However, he added that the company does nothave a near-term positive catalyst to drive significant and immediateoutperformance in its shares.