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Guggenheim downgrades Capital One, Wells Fargo, US Bancorp


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Guggenheim downgrades Capital One, Wells Fargo, US Bancorp


Peter Winter, a Sterne Agee CRT analyst, upgraded Columbus, Ohio-basedHuntington Bancshares "buy" from "neutral" and raised his price target to $11.50from $10.50. The analyst maintained his 2016 and 2017EPS estimates of 84 cents and 99 cents, respectively.

Winter thinks that Huntington is not reliant on rate increasesand has essentially no exposure to energy, so it has a number of levers to generatepositive operating leverage. He added that the company achieved its goal of positiveoperating leverage in 2015 for the third consecutive year and it is well-positionedto continue this trend in 2016. He highlighted that the pending deal is expected to be 3% accretive to EPS throughcost saves in 2017 and 10% in 2018.

Winter thinks that the First Merit deal makes a "great dealof sense" because of the significant branch overlap that can lead to 40% . Furthermore, he notedthat the deal is expected to be highly accretive to profitability, resulting ina 300-basis-point improvement in return on tangible common equity and 400-basis-pointimprovement in cash efficiency ratio.


Winter downgraded Cincinnati-based Fifth Third Bancorp to "neutral" "buy" and also lowered hisprice target to $18 from $19.

He revised his 2016 and 2017 EPS estimates to $1.50 from $1.58and to $1.68 from $1.78, respectively, to reflect slower loan growth and lower feeincome.

The analyst anticipates ongoing headwinds on both the revenueand expense sides in 2016, so he expects the company's earnings turnaround to takelonger than expected. Winter thinks that the company will generate loan growth inline with GDP growth of approximately 2% to 3%, which is slower than peers, whereloan growth is projected to be closer to 4% to 5%. He continued to decrease hisEPS estimates and believes that consensus estimates are too high. The analyst alsoexpects the company's expenses to grow 4% to 5% in 2016, given its risk and complianceinitiatives and investments in technology and infrastructure.

Eric Wasserstrom, a Guggenheim Securities LLC analyst, loweredhis ratings for Capital One FinancialCorp., Wells Fargo &Co. and U.S. Bancorp.

The analyst downgraded Capital One to "sell" from "neutral"and introduced a price target of $62. He also loweredhis 2016 and 2017 EPS estimates for the company to $7.15 and $7.40, from $7.20 and$7.60, respectively.

Wasserstrom expects the company to report negative net incomegrowth in 2016 and 2017, due to competitive pressures causing increased acquisitionand operating costs and moderate credit deterioration. As a result, he is maintaininghis EPS estimates substantially below consensus over the time period.

Wells Fargo was lowered to "neutral" from "buy,"while the analyst established an estimated fair value of $51 for the company's stockfrom a price target of $56. The analyst noted that thecompany's stock valuation is full relative to the peer group.

He also decreased his 2016 and 2017 EPS estimates to $4.10 and$4.40, from $4.20 and $4.45, respectively.

Wasserstrom downgraded U.S. Bancorp to "neutral" from"buy," and established an estimated fair value of $43 from a price targetof $48.

The analyst also lowered his 2016 and 2017 EPS estimates to $3.40and $3.79, from $3.45 and $3.80, respectively.

He noted that his current projections for the company indicatestable rather than improved profitability metrics, so his valuation of U.S. Bancorp'sstock also largely reflects stable EPS and book value multiples.