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In This List

JPMorgan reports "solid results in a difficult environment"

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity

Street Talk Episode 70 - Banks' Liquidity Conundrum Could Fuel M&A Activity

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go


JPMorgan reports "solid results in a difficult environment"

Notable reiterations

Several analysts released reports on JPMorgan Chase & Co. following the bank's first-quarterearnings release Wednesday.

Sandler O'Neill & Partners LP analyst Jeffery Harte believesthat JPMorgan reported"solid results in a difficult environment." He noted that the company'sfirst-quarter results exceeded the consensus EPS estimate of $1.26, while revenuesbeat "admittedly lowered expectations." The analyst raised his 2016 and2017 EPS estimates to $5.78 and $6.30, from $5.56 and $6.23, respectively.

"Considering that [first-quarter] consensus for [JPMorgan]came down 18% since the start of this year (driven predominantly by fears over capitalmarkets-related revenues), its 6% beat this morning was met by investors with anunderstandable sigh of relief," BMO Capital Markets analyst James Fotheringhamnoted in a research note where he reiterated his "outperform" rating forthe company. Fotheringham raised his 2016 and 2017 EPS estimates to $5.95 from $5.88,and to $7.21 from $7.06, respectively, while increasing his price target to $77from $71. He noted that the company's earnings were inspired by lower-than-expectednoninterest expenses, higher NIM, and better corporate and investment banking results.

Baird Equity Research analyst David George noted that the company'sfirst-quarter results were a "solid start to bank reporting." George wrote,"The post-earnings rallypartially reflects negative sentiment towards the money-center banks and underweightpositioning into numbers, and further improvement in capital markets activity wouldlikely extend the gains." He also wrote that the company had a "hiccup"with its resolution plan,but it is still well positioned for more capital return following CCAR. He reiteratedhis "outperform" rating on the stock with a price target of $75 and increasedhis 2016 EPS estimate to $5.59 from $5.55, while maintaining his 2017 EPS estimateof $6.10.

However the company missed FBR & Co. analyst Paul MillerJr.'s projected EPS of $1.38. The analyst noted that his estimates were above thestreet consensus because he believed that market volatility and continued weaknessin energy markets were too heavily reflected in the consensus. In his view, thecompany's first-quarter results were affected by ongoing market volatility, resultingin a year-over-year decline in revenues from principal transactions, investmentbanking, and asset management services. Miller Jr. reiterated his "outperform"rating and $75 price target and increased his operating 2016 EPS estimate to $5.85from $5.83, while maintaining his 2017 operating EPS estimate of $6.50.

Initiations

Matthew Breese, a Piper Jaffray analyst, initiated coverage offour banks including Woodbridge, N.J.-based NorthfieldBancorp Inc.; Farmington, Conn.-based First Connecticut Bancorp Inc.; Norwood, Mass.-based ; and Townshipof Washington, N.J.-based OritaniFinancial Corp.

Breese initiated coverage of Northfield Bancorp with a "neutral"rating and $15 price target.

His 2016, 2017 and 2018 operating EPS estimates are 56 cents,60 cents and 70 cents, respectively.

The analyst thinks that the company has done a "solid job"since its second-step conversionin 2013, through buybacks, dividends and organic loan growth, while remixing thecomposition of balance sheet. The analyst expects a stable return on asset ratioof 0.65% to 0.70% and a gradual improvement in return on tangible common equityratio to 5.1% through 2018, given the company's recent acquisition of HopewellValley Community Bank, solid loan growth and a continued mix-shift inearning assets.

He noted that even though the bank continues to grow loans ata robust pace, deposit costs have been increasing and given re-pricing of multi-familyloans at lower rates, which is the bank's primary lending segment, margin compressionremains a headwind.


First Connecticut was initiated with an "overweight"rating and a price target of $18.50.

The company's 2016, 2017 and 2018 EPS estimates are 98 cents,$1.04 and $1.12, respectively.

The analyst expects the company to grow its loan portfolio ata rate of 6% to 7% through 2017, in the "healthy and solid" geographiesof Hartford, Conn., while building a presence in Springfield, Mass. However, Breesealso thinks that the company's profitability metrics will stay below peer averageswith an estimated 2016 return on assets of 0.52%.

In addition, the analyst believes that there is "flexibilityaround the company's self-imposed 7 year no-sale moratorium," following hisconversations with the company management. Though he is not suggesting a sale inthe near term, he thinks that the company would receive a valuation of $22 to $24per share in a deal.


Breese initiated Blue Hills Bancorp with an "overweight"rating and $15.50 price target.

His 2016, 2017 and 2018 earnings estimates are 40 cents, 46 centsand 54 cents per share.

The analyst noted that the company continues to leverage capitalthrough loan growth, share repurchases and dividends. He expects the company togrow loans at a double-digit rate, repurchase 1.4 million shares, and pay out 10cents per share in dividends over the next year. The analyst also believes the company'smanagement team would like M&A to play a role in the bank's overall growth strategyin the New England markets.

He forecasts that the company will report a return on asset ratioof 0.42% in 2016, and added that even though the company's profitability metricsare below peers, historically, "mutual conversions typically have solid stockperformance as they march towards their three year no-sale moratorium." Thecompany's three-year no-sale moratorium will expire in July 2017.


Oritani Financial was initiated with a "neutral" ratingand a 12-month price target of $16.

The analyst's 2016, 2017 and 2018 operating EPS estimates are90 cents, 95 cents and 88 cents, respectively.

Breese expects the company's core margin to decrease over thenext two years, because of margin pressure driven by lower loan yields and increasingdeposit costs. He also thinks that it might result in a sub-1.00% return on assetratio in the second half of fiscal 2017, compared to 1.19% in 2015.

Breese noted that his price target, at 135% of tangible bookvalue, is at a premium compared to the company's peers' multiple at 116% of priceto tangible book value, based on higher levels of profitability, dividend yieldand franchise value. However, he believes that there is "limited upside inthe company's valuation outside of a terminal event," because of decreasingprofitability levels, along with an elevated loan to deposit ratio. He thinks thatthe company could fetch $16 to $18 per share in a deal.