Deutsche Bank Upgrades Huntington Bancshares (HBAN) to Buy
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Deutsche Bank upgraded Huntington Bancshares (NASDAQ: HBAN) from Hold to Buy with a price target of $11.50 (from $10.50). Analyst Matt O-Connor thinks concerns surrounding consumer indirect auto lending are overblown.
"HBAN shares have devalued by 15% since the FMER deal was announced— trading at a 10% discount to peers on 2017E vs. a 5% premium before the deal. The devaluation reflects a combination of concerns around execution risk, the ability to implement cost saves, and the significant earnback period for TBV dilution (which mgmt estimated to be 5.5 years and we believe could be longer). There’s also industry-wide concerns surrounding consumer indirect auto lending, a large business for HBAN. However, we think these concerns are overblown and that the large devaluation is overdone. Our 2017e is below consensus (at $0.85 vs. $0.89) as we assume stable interest rates and have more conservative deal accretion estimates. However, the 5% EPS downside vs. consensus is similar to what we see for peers. While we weren’t thrilled with the deal at announcement, it’s better than some other recent large deals and HBAN had a strong currency/earnings into the deal," said the analyst.
Shares of Huntington Bancshares closed at $9.74 yesterday.
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