Barclays Maintains an 'Underweight' on KeyCorp (KEY); 3Q11 EPS Review: Loan Growth Returns
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Price: $21.85 --0%
Rating Summary:
22 Buy, 16 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 7 | Down: 5 | New: 25
Rating Summary:
22 Buy, 16 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 25
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Barclays maintains an 'Underweight' on KeyCorp (NYSE: KEY) price target of $9.00.
Barclays analyst says, "Keycorp's return to profitability (6 straight quarters) has been primarily reserve release driven (7 straight releases with several provision credits). Using a more normalized 0.60% provision/loans ratio reduces its reported ROA of 1.14% in 3Q11 to 0.80% (below its 1.00%-1.25% normalized target). With that said, despite significant headwinds (exit loan portfolio and discontinued ops. at 14% of average earnings assets) it continues to believe it's at a loan growth inflection point (period-end loans +1% in 3Q; 1st increase in 13 quarters). With funding cost levers (CD maturities) likely to support its net interest margin in this difficult interest rate environment, we believe its profitability improvements can continue even as the benefit from its reserve releases wanes. However, much of this potential improvement hinges on its ability to continue growing loans (no small task today). We note that its capital position is strong (T1C of 11.3%) and it is trading significantly below tangible book ($9.10)." (Barclays raises FY11 EPS estimate from $0.85 to $0.90, but lowers FY12 EPS estimate from $0.95 to $0.90)
For more ratings news on KeyCorp click here and for the rating history of KeyCorp click here.
Shares of KeyCorp closed at $6.81 yesterday.
Barclays analyst says, "Keycorp's return to profitability (6 straight quarters) has been primarily reserve release driven (7 straight releases with several provision credits). Using a more normalized 0.60% provision/loans ratio reduces its reported ROA of 1.14% in 3Q11 to 0.80% (below its 1.00%-1.25% normalized target). With that said, despite significant headwinds (exit loan portfolio and discontinued ops. at 14% of average earnings assets) it continues to believe it's at a loan growth inflection point (period-end loans +1% in 3Q; 1st increase in 13 quarters). With funding cost levers (CD maturities) likely to support its net interest margin in this difficult interest rate environment, we believe its profitability improvements can continue even as the benefit from its reserve releases wanes. However, much of this potential improvement hinges on its ability to continue growing loans (no small task today). We note that its capital position is strong (T1C of 11.3%) and it is trading significantly below tangible book ($9.10)." (Barclays raises FY11 EPS estimate from $0.85 to $0.90, but lowers FY12 EPS estimate from $0.95 to $0.90)
For more ratings news on KeyCorp click here and for the rating history of KeyCorp click here.
Shares of KeyCorp closed at $6.81 yesterday.
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