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Piper Jaffray initiates coverage of 2 Hawaiian banks

Initiations

Piper Jaffray analyst Brett Rabatin initiated coverage ofHonolulu-based Bank of HawaiiCorp. at "neutral" with a $70 target price.

His 2016, 2017 and 2018 EPS estimates are $4.01, $4.11 and $4.50,respectively.

Rabatin thinks the shares are a solid investment with lesspotential credit risk than its mainland peers. In addition, he thinks that thecompany will be able to generate some operating leverage in 2017, as a resultof its efforts to increase revenue growth. He highlighted that companymanagement is aiming for longer-term efficiency by improving its back-officeoperations and its digital capabilities to retail and small-business customers,along with fine-tuning its delivery channels.

He expects the management initiatives to drive strongerrevenue growth, which will cause low-single-digit expense growth in at least2017.

In addition, he noted that the share price reflects thequality of the franchise, and he believes that "catalysts for EPS upsidesurprises are somewhat limited."


Rabatin initiated Honolulu-based at"neutral" with a price target of $25.

His 2016, 2017 and 2018 EPS estimates are $1.46, $1.57 and$1.59, respectively.

The analyst expects the company to modestly improve itsearnings through 2018. Rabatin thinks that the shares are a good investment butthinks that the share price reflects the near-term prospects, including eitherfaster growth or more profitable companies trading at similar valuations,within the industry.

Rabatin thinks that if the company manages to improve itsrevenue, while maintaining its expense base over the next two years, it mightbe able to modestly improve its earnings despite the low interest rateenvironment.

In addition, based on low level of risk in its current loanportfolio and high loan-loss reserves, the analyst thinks that the company isin a better position in the case of a recession or if higher net charge-offshit the industry.

Upgrades

Keefe Bruyette & Woods Inc. analyst Collyn Gilbertupgraded Brookline BancorpInc. to "outperform" from "market perform" butmaintained her target price of $13. Her 2016 and 2017EPS estimates are 73 cents and 78 cents, respectively.

The analyst believes that Brookline is a favorableinvestment in light of current challenges tied to interest rates, earningspressures and commercial real estate concentration concerns. In addition,Gilbert noted that the company has a fairly well-diversified balance sheet andis less dependent on real estate-related assets compared to its peers. Thecompany also has an "upward earnings bias" in a challenging operatingenvironment. Furthermore, the analyst thinks that the company's management isproactive when it comes to the timely management of or exit from certainbusiness lines.


Wells Fargo Securities analyst Matthew Burnell upgradedComerica Inc. to"market perform" from "underperform" and estimated thecompany's 12-month price target within the range of $39 to $41, up from $38 to$40.

However, he lowered his 2016 EPS estimate to $2.40 from$2.45, and reduced his 2017 EPS estimates to $3.15 from $3.25.

The analyst noted that the company's stock price declined12.1% over the last month, while the S&P 500 fell 0.7%. The shares arecurrently trading at the midpoint of the analyst's valuation range of $39 to$41. So, he upgraded the stock as the company plans to announce its detailedprofit improvement plan in mid-July. In addition, Burnell thinks thatstabilizing oil prices and lower rates are more adequately reflected in thecompany valuation.

"While it seems premature to declare an 'all-clear' onenergy-related credit exposures, we think improved energy price levels and amore open capital markets environment offer CMA's borrowers' a bit moreflexibility than we'd previously anticipated," he added.


Downgrade

Burnell of Wells Fargo Securities downgraded to "marketperform" from "outperform," and estimated the company's 12-monthprice target within the range of $45 to $47, down from $50 to $52.

He maintained his 2016 and 2017 EPS estimates at $4.50 and$5.25, respectively.

The analyst downgraded the company in light of elevatedrisks of a post-Brexit global growth slowdown. He noted that the companyderives 40% of its revenue from international markets.

Citi's buyback and dividend plans during the 2016Comprehensive Capital Adequacy and Review process exceeded the analyst's andStreet estimates. However, Burnell noted that although the improved planshelped the company shares outperform its peers, Citi was not able to maintainthe momentum.

Furthermore, the analyst highlighted that, after Citiacquired the Costcoportfolio from American ExpressCo. in June, Costco co-brand credit card holders have beendissatisfied with the company's roll out of its new "Anywhere" card,according to recent media reports. "The new portfolio isn't expected tobecome profitable for the first year under Citi, and the roll-out issuesappears to be a short-lived matter so this is unlikely to be a materialearnings challenge. Still, such a roll out could reduce future sellers' desireto partner with Citi for fear of harming the customer/merchantrelationship," he added.