SunTrust Robinson Humphrey Downgrades Colonial Banc Group (CNB) to Neutral
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SunTrust Robinson Humphrey downgrades Colonial Banc Group (NYSE: CNB) from Buy to Neutral.
The downgrade is based upon valuation as the stock is up 57% since their upgrade on July 16. Also, the company is trading at 1.04x tangible book value which is in line "with other mid-sized CRE heavy bank lenders with excellent franchise value."
The firm highlights that CNB has $783 million in excess capital and a $247 million loan loss reserve. The firm estimates that a worst case scenario of $765 million in additional loan losses over the next two year. Therefore, CNB has enough capital to absorb "losses unless there is a deep, protracted recession and spillover of weakness into C&I and CRE loans is more severe than anticipated." Also, the firm believes that CNB is "being much more aggressive with problem loan identification and disposition than most peers, which is reflected in CNB’s credit metrics and loan workout process."
Overall, the firm is encouraged by CNB's aggressive loan workout efforts, and slower problem loan migration during 2Q08, but thinks the shares are close to fairly valued at this point.
The Colonial BancGroup, Inc. operates as the holding company for Colonial Bank, National Association, which provides commercial banking, wealth management services, mortgage banking, and insurance services in Florida, Alabama, Georgia, Nevada, and Texas.
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