UPDATE: B.Riley/FBR Downgrades Customers Bancorp (CUBI) to Neutral

(updating comment)

B.Riley/FBR analyst Steve Moss downgraded Customers Bancorp (NYSE: CUBI) from Buy to Neutral with a price target of $14.00 (from $30.00).

The analyst comments "All forms of consumer credit carry elevated risks due to the coronavirus that are likely to result in volatile earnings and substantial uncertainty. Unfortunately, this includes CUBI's unsecured portfolio of $1.2B, or 15% of total loans as of December 31, 2020. While we expect CUBI to benefit from lower interest rates, the credit performance of its relatively new unsecured consumer portfolio is a serious concern that will likely keep range bound until consumer performance and behavior are observed for several quarters. Per CUBI's 10-K as of December 31, 2019, the average debt-to-income ratio at origination, average loan size, and average FICO score at origination of the unsecured consumer loan portfolio was 22.4%, $14.5K, and 744, respectively. Additionally, as of December 31, 2019, the LLR ratio for consumer loans was 1.75%, $5.8M or 0.49% were 30-89 days past due, $1.6M or 0.13% were NPL, and 81% of the consumer loans are due within five years. Other consumer loans accounted for essentially all of CUBI's $7.8M of 2019 NCOs. Based on CUBI's CECL disclosures at the midpoint, we estimate the CECL reserve for other consumer loans will increase by ~ $42M, or ~350 bps, before additional increases for economic forecasts. Due to our expectations for significantly higher loan loss reserves, we reduce our 2020 and 2021 estimates from $3.10 and $3.45 to $2.15 and $2.80, respectively."

For an analyst ratings summary and ratings history on Customers Bancorp click here. For more ratings news on Customers Bancorp click here.

Shares of Customers Bancorp closed at $10.66 yesterday.

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