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KBW upgrades Missouri-based Commerce Bancshares, downgrades Sussex, BCB


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KBW upgrades Missouri-based Commerce Bancshares, downgrades Sussex, BCB


* Commerce Bancshares Inc.'s stock rating got upgraded to "market perform" from "underperform," to reflect "slightly higher" profitability estimates in light of the quality of its deposit base and increasing inflation expectations.

Keefe Bruyette & Woods' Christopher McGratty said the previous rating had been due to the downside risk to consensus estimates of net interest margin and expenses.

The analyst raised the target price by $6 to $60.


* KBW's Collyn Gilbert, on the other hand, downgraded Sussex Bancorp and BCB Bancorp Inc. on valuation.

Both were re-rated "market perform" from "outperform." Sussex's price target was raised by 50 cents to $33; BCB's was kept at $16.50.

Notable reiterations

* Citizens Financial Group Inc. could be on the hook for alleged loan fraud linked to Paul Manafort. The lending exposure is a "trivial" amount, Sandler O'Neill & Partners' R. Scott Siefers pointed out, but the disclosures are being made at a time "the market is hyper-sensitive" to possible deficiencies in Bank Secrecy Act and anti-money laundering compliance.

Details revealed, however, make it seem like "an isolated incident," and Siefers noted the company's ties to Manafort have been reported by the media since at least mid-2017 — meaning "regulators have presumably had several months to find and address any concerns."

Should regulators decide an enforcement action is called for, it is likely to be similar to those issued against U.S. Bancorp, BB&T Corp. or Investors Bancorp Inc., wrote Piper Jaffray's Kevin Barker. Such a consent order might raise the bank's expenses by 13 cents to 26 cents per share and prompt restrictions on Citizens Financial's bankers, hampering their loan origination capacity.

A consent order would also limit Citizens' M&A abilities, Wedbush's Peter Winter added, but not with regard to bolt-on fee income deals that the company may be more interested in anyway. Nor is regulatory action likely to hamper it from passing the next Comprehensive Capital Analysis and Review.

Winter, arguing the selloff "seems excessive" when information is so limited, has an "outperform" rating on the stock and a $52 price target. Piper Jaffray's Barker also rates it "overweight," but lowered the price target to $48 from $51. Sandler's Siefers, who has a "hold" rating on the stock, lowered the target to $48 from $50.