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Hovde upgrades Hancock Holding Co.


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Hovde upgrades Hancock Holding Co.


* Hovde Group's Joseph Fenech raised Hancock Holding Co.'s stock rating to "outperform." He also raised the Gulfport, Miss.-based company's price target to $58.

They were previously "market perform" and $52.50.

Fenech attributed the stock's years of underperformance "mostly to bad luck," pointing out the legacy company had been among the early examples of a bank looking to cross the $10 billion asset threshold after Dodd-Frank and ended up doing a reasonably priced, "strategic home run" of a deal that created an "impressive Gulf South-based franchise." Concerns related to the transaction, the impact of the acquired company's exposure to energy loans and management's missteps in disclosing issues do not justify continued valuation punishment, he argued.

Industry reports

* With tax reform legislation signed, Piper Jaffray analysts now project large-cap regional banks to realize an average EPS accretion of 14%. Santander Consumer USA Holdings Inc., Capital One Financial Corp. and M&T Bank Corp. will especially benefit, with their average calculated to be 17%.

At small/mid-cap banks, average EPS accretion is estimated at 16%. For Flagstar Bancorp Inc., Washington Federal Inc., LegacyTexas Financial Group Inc., Veritex Holdings Inc., The Bancorp Inc. and Oritani Financial Corp., it may be more than 20%.

The analysts added the accretion is likely to "mostly fall to the bottom line," near-term, before being later competed away or utilized for investments. Tax reform, as it stimulates economic and financial activity, should also boost loan growth.

Charles Peabody of Compass Point noted it is also projected to pause further credit deterioration, especially in consumer loans. However, "corporate credit quality could be the biggest loser in the tax reform process, as credit bends under the weight of higher interest rates," the analyst wrote.