Deutsche Bank Calls Sell-Off in Banking Stocks Overdone: Upgrades KEY, RF, STI, Cuts CMA
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Price: $14.93 --0%
Rating Summary:
24 Buy, 12 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 7 | Down: 5 | New: 3
Rating Summary:
24 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 3
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Deutsche Bank believes that the sell-off on banks is way overdone as bank stocks as a sector are down 24 percent when the S&P is only down roughly 13 percent.
The firm upgraded shares of KeyCorp (NYSE: KEY), Regions Financial (NYSE: RF), and SunTrust Banks (NYSE: STI) to a Buy rating from Hold today, but downgraded shares of Comerica Inc. (NYSE: CMA) from a Buy rating to Hold.
Deutsche notes that KEY is the positioned the best to buyback shares given Tier 1 common of 11.1 percent. They forecast that the bank will repurchase 20 percent of their total shares throughout the next two years and will only use just half of their capital.
Management at RF has been busy cutting costs and the firm comments that there is no near-term pressure to repay the TARP loan. The company will most likely perform better than many are anticipating that it will.
Shares of STI are cheap as they are currently trading at seven times their 2013 earnings. The firm reports that the bank has strong capital and good underlying earnings power over time.
An analyst at Deutsche comments, "Our BUY thesis was based on a pickup in C&I loans and higher rates. While industry C&I loans are up 2.2% unannualized so far this quarter, if we include CRE we find loans are up just 0.6%-and growth overall doesn’t seem poised to pick up any time soon. CMA’s valuation is low on tangible book, credit risk seems limited and capital is high. But credit leverage is limited and capital build from here isn’t likely to be meaningful until loans/rates rise."
The firm on average, cut its third quarter earnings estimates by 8 percent and its 2011 estimates by 3 percent.
The firm upgraded shares of KeyCorp (NYSE: KEY), Regions Financial (NYSE: RF), and SunTrust Banks (NYSE: STI) to a Buy rating from Hold today, but downgraded shares of Comerica Inc. (NYSE: CMA) from a Buy rating to Hold.
Deutsche notes that KEY is the positioned the best to buyback shares given Tier 1 common of 11.1 percent. They forecast that the bank will repurchase 20 percent of their total shares throughout the next two years and will only use just half of their capital.
Management at RF has been busy cutting costs and the firm comments that there is no near-term pressure to repay the TARP loan. The company will most likely perform better than many are anticipating that it will.
Shares of STI are cheap as they are currently trading at seven times their 2013 earnings. The firm reports that the bank has strong capital and good underlying earnings power over time.
An analyst at Deutsche comments, "Our BUY thesis was based on a pickup in C&I loans and higher rates. While industry C&I loans are up 2.2% unannualized so far this quarter, if we include CRE we find loans are up just 0.6%-and growth overall doesn’t seem poised to pick up any time soon. CMA’s valuation is low on tangible book, credit risk seems limited and capital is high. But credit leverage is limited and capital build from here isn’t likely to be meaningful until loans/rates rise."
The firm on average, cut its third quarter earnings estimates by 8 percent and its 2011 estimates by 3 percent.
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