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Baird upgrades Fifth Third to 'neutral'

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Baird upgrades Fifth Third to 'neutral'

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* David George of Robert W. Baird & Co. raised Cincinnati-based Fifth Third Bancorp's stock rating to "neutral" from "underperform" and maintained the price target at $32.

The analyst wrote that Fifth Third is making "steady progress" in its Project NorthStar initiatives, with improving organic growth, operating leverage and capital return. The announcement of Fifth Third's acquisition of MB Financial Inc., according to the analyst, "triggers concerns that the pace of organic capital return may slow and that the integration may potentially disrupt execution."

The transaction should lower Fifth Third's common equity Tier 1 ratio by about 45 basis points, George noted. However, Fifth Third's management stressed that the transaction should not change its original capital plan for 2018 and expected capital deployment, wrote George.

Coverage transfers

* Compass Point Research & Trading LLC on May 21 transferred coverage of San Diego-based BofI Holding Inc. and Puerto Rico-based Popular Inc. to analyst Scott Valentin from analyst Jesus Bueno.

Valentin downgraded the rating on BofI's stock to "neutral" from "buy," citing valuation, and lowered the price target to $44 from $47. The analyst increased the full-year 2018 earnings-per-share estimate by 1 cent to $2.53, but reduced the EPS estimate for full year 2019 to $3.16 from $3.29, due to lower projected fee income.

For Popular, Valentin retained the stock's "buy" rating and increased the price target to $55 from $50. The analyst raised the full-year EPS estimates to $4.15 from $3.91 for 2018, and to $5.15 from $4.74 for 2019, on the back of lower provision expense and higher noninterest income. The higher EPS estimates also reflect the "better-than-expected" operating environment following Hurricane Maria.

* Compass Point also transferred coverage of the mortgage REIT and real estate services sector to analyst Vivek Agrawal from Fred Small, due to a reallocation of resources.

Specifically, Agrawal now covers mortgage REITs AGNC Investment Corp., Annaly Capital Management Inc., Arlington Asset Investment Corp., CYS Investments Inc., Granite Point Mortgage Trust, MFA Financial Inc., Starwood Property Trust Inc. and Two Harbors Investment Corp., as well as real estate services firm Walker & Dunlop Inc.

Dropped coverage

* Compass Point dropped coverage of Plano, Texas-based LegacyTexas Financial Group Inc., formerly covered by Bueno, as a result of reallocation of resources.