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KBW upgrades Heritage Financial after deal announcement

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KBW upgrades Heritage Financial after deal announcement

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* Jacquelynne Bohlen of Keefe Bruyette & Woods raised Heritage Financial Corp.'s rating to "outperform" from "market perform." The analyst also increased Heritage Financial's price target to $36 from $33.

Bohlen increased the Olympia, Wash.-based company's 2019 EPS estimate to $2.15 from $2.05, suggesting accretion of 4.9% related to its pending acquisition of Premier Commercial Bancorp. She kept Heritage Financial's 2018 EPS estimate unchanged.

Downgrades

* FIG Partners' John Rodis downgraded Wintrust Financial Corp.'s rating to "market perform" from "outperform" on valuation.

The analyst wrote that the Rosemont, Ill.-based company's stock is up by 14% since its upgrade Feb. 9. Rodis maintained Wintrust's price target at $93.

* Goldman Sachs analyst Alexander Blostein downgraded Bank of New York Mellon Corp.'s stock rating to "neutral" from "buy," as the analyst sees a 5% share price upside to the $60 price target for the New York-based bank's stock.

The analyst wrote that BNY Mellon should continue to be able to take advantage of higher interest rates to drive EPS growth, among other factors such as an uptick in capital returns. However, uncertainty around organic revenue growth may limit price-to-earnings expansion in the next one to two years, Blostein added.

Industry reports

* Hovde Group's Joseph Fenech wrote that 37 New York City taxi medallions were sold at an average price of $297,000 in February, in comparison to 61 medallions sold at an average price of $188,000 in January. This marks an improvement in the average sale price from the previous months, according to Fenech.

However, there is a possibility of 22 foreclosure sale prices not representing the true value of the medallions in the open market, the analyst wrote.

* Raymond James analysts wrote that banks with greater public funds exposure may be at a greater risk of rising rates affecting deposit betas. Nine of the top 20 most exposed banks in their coverage have experienced a higher deposit beta than the rest of the industry, they noted. A deposit beta measures the extent to which a rate event, typically a central bank rate increase, affects the deposit costs that banks pay to their customers.

While the analysts wrote that investors need to monitor the situation as rates are expected to rise in 2018 and 2019, they noted that they "are not explicitly sounding the alarm on public funds exposure."

The analysts maintained "market perform" ratings on 14 of the top 20 exposed banks, an "underperform" rating on Prosperity Bancshares Inc. and a "strong buy" rating on Chemical Financial Corp., Hancock Holding Co., F.N.B. Corp. and Bank of the Ozarks.