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Stephens initiates WesBanco, Xenith Bankshares


* D.A. Davidson & Co. analyst Gary Tenner downgraded CU Bancorp to "neutral" from "buy," and increased the company's price target to $43 from $42.

The analyst updated his recommendation for the Los Angeles-based company after PacWest Bancorp announced its plan to acquire CU Bancorp in a $705 million, or $39.45-per-share, deal.

The analyst calculated his price target for CU Bancorp based on $58 price target on PacWest shares and the announced exchange ratio of 0.5308 plus $12 per share in cash. CU Bancorp closed at $38.88 on Thursday, April 6, after the deal announcement.


* Stephens Inc. analyst Austin Nicholas initiated coverage of WesBanco Inc. with an "overweight" rating and a 12-month price target of $43.

The analyst noted that the company is now "just under [$10 billion] club", after the Your Community Bankshares Inc. deal. Nicholas thinks that the company will now move securities into loans to maintain its total assets under the $10 billion mark, until it finds a deal that helps it offset lower interchange revenue and higher regulatory costs from crossing the asset threshold.

In addition, the analyst thinks that the company is an attractive investment under the current regulatory environment, because of its year-to-date underperformance and shares trading at a steep discount. The analyst thinks that the company's current discounted valuation is unwarranted as the company has above-peer profitability and efficiency. In addition, the company has a history of successful M&A, better growth profile, and strong dividend yield.

* Stephens' Nicholas also initiated covering Xenith Bankshares Inc. at an "equal-weight" rating.

The analyst noted that the company is a "product of a unique merger" of Xenith Bankshares Inc. and Hampton Roads Bankshares Inc. He added that both institutions had private equity backing. The merger between the two entities allowed the combined entity to recapture a substantial deferred tax asset and provide the company capital to increase lending, especially in the D.C. Metro.

Given an experienced management team, the analyst expects the company to reduce deposit costs and increase market share.

In addition, the analyst noted that although the company currently has worse-than-peers efficiency ratio — 76% for Xenith compared to 64% for its peers — significant expected cost savings and complementary business models will help the combined entity improve its efficiency ratios.