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Market valuations, economic outlook lead to waves of rating changes

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Market valuations, economic outlook lead to waves of rating changes

Upgrades

* UBS analyst Saul Martinez changed the ratings on several companies in his coverage universe in a series of reports dated Jan. 8. He upgraded M&T Bank Corp. from "sell" to "neutral" with a 12-month price target of $157, from the prior $171. He said the recent stock market selloff has balanced the company's "risk to reward" valuation and that the bank has "considerable" potential to optimize capital.

* Martinez upgraded Regions Financial Corp. from "neutral" to "buy" with a price target of $17, from the prior $20. The bank has been one of the worst performers since August 2018, but that "U-turn in sentiment" has not changed its investment fundamentals. He wrote that the bank has "ample room" for efficiency improvements, and its deposit franchise remains a strength.

* Martinez also upgraded Bank of America Corp. from "neutral" to "buy" with a 12-month price target of $32, from the prior $33. He said the bank has shown risk and expense discipline and offers above-peer profitability.

"Even with slowing revenue growth, [Bank of America] should continue improving efficiency metrics and, importantly, appears comparatively well positioned to withstand a turn in credit," he wrote.

* Edward Jones analyst James Shanahan also upgraded shares of Bank of America from "hold" to "buy" and added it to the broker's "stock focus list" in a Jan. 8 report. Shanahan highlighted the bank's improved fundamental performance in recent years and its attractive mix of financial services. He wrote that the recent share price decline offers an attractive entry point for investors.

Downgrades

* Wolfe Research analyst Steven Chubak lowered his rating on Wells Fargo & Co. from "outperform" to "peer perform" in a Jan. 8 report, following an analysis of an economic scenario that included either a slowdown or recession. He wrote that the bank faces risks to its fee income and that capital return and efficiency targets have been priced into 2019 estimates, but added that the bank's credit resiliency is a "positive." His price target is $54.

* Compass Point managing director Laurie Havener Hunsicker lowered ratings on numerous companies in her universe. She wrote in a Jan. 9 report that she increasingly favors "clean, low-costing deposit franchises" and believes stock prices will be under pressure in the coming months. The new year could hold challenges such as "sluggish loan growth, fierce deposit competition, and a difficult yield curve environment" that could all pressure earnings.

She lowered her ratings on:

- Blue Hills Bancorp Inc., from "buy" to "neutral," with a new price target of $23;

- Berkshire Hills Bancorp Inc., from "neutral" to "sell," with a new price target of $26;

- Brookline Bancorp Inc., from "buy" to "neutral," with a new price target of $15;

- Columbia Financial Inc. (MHC), from "buy" to "neutral," with a new price target of $15.50;

- CapStar Financial Holdings Inc., from "neutral" to "sell," with a new price target of $13;

- HarborOne Bancorp Inc. (MHC), from "neutral" to "sell," with a new price target of $14.50;

- Independent Bank Corp., from "buy" to "neutral," with a new price target of $79;

- Melrose Bancorp Inc., from "buy" to "neutral," with a new price target of $19;

- PCSB Financial Corp., from "buy" to "neutral," with a new price target of $20;

- Randolph Bancorp, from "neutral" to "sell," with a new price target of $13; and

- Western New England Bancorp, from "buy" to "neutral," with a new price target of $10.