Downgrades
*
The analyst continues to believe the company will be able to improve its profits as maturing Federal Home Loan Bank advances rolled at lower rates. In addition, he thinks the company might sell after a three-year sale moratorium ends Jan. 23, 2017. However, given the increase in yields on 10-year U.S. Treasurys since the Presidential election, the analyst is not expecting the company's mortgage business to perform as well as he initially expected.
* American Capital Partners LLC analyst Anthony Polini lowered his investment rating on Lake Success, N.Y.-based Astoria Financial Corp. to "neutral" from "strong buy" after the company and Westbury, N.Y.-based New York Community Bancorp Inc. mutually agreed to terminate their deal.
The analyst noted that his higher rating was contingent on the deal completing and added that Astoria has the highest price-to-earnings multiple in his coverage universe, while the company has the lowest profitability metrics.
Polini also introduced a 2018 earnings per share estimate of 54 cents.
Industry notes
*
"Given the uncertainty about the impact of Trump's fiscal and regulatory policies, we suggest investors look at banks with distinct catalysts," they noted. The analysts are focusing on Cleveland, Ohio-based KeyCorp and Columbus, Ohio.-based Huntington Bancshares Inc. in 2017, and on Los Angeles-based Cathay General Bancorp and Pasadena, Calif.-based East West Bancorp Inc. in 2018.
The analysts upgraded Huntington Bancshares to "outperform" from "market perform" as they expect the company to report better earnings because of the FirstMerit Corp. deal. In addition, they think the company's loan portfolio is well-positioned to take advantage of the higher interest rates. They also increased the company's price target to $16 from $13.
*
Based on their bull scenario, the analysts upgraded San Francisco-based First Republic Bank, Pittsburgh-based F.N.B. Corp. and Salt Lake City-based Zions Bancorp. to "outperform" from "market perform" and Bridgeport, Conn.-based People's United Financial Inc. to "market perform" from "underperform." Meanwhile, the analysts downgraded Champaign, Ill.-based First Busey Corp.; Irvine, Calif.-based First Foundation Inc.; Seattle-based HomeStreet Inc.; and Houston-based Prosperity Bancshares Inc. to "market perform" from "outperform" as their recommendations are more positive on asset-sensitive banks.