Sterne Agee Upgrades Doral Financial Corp. (NYSE)

Sterne Agee has a Neutral rating on Doral Financial Corp. (NYSE: DRL).

In a research report sent to clients, Sterne Agee writes, "We are upgrading our rating on DRL. The current risk/reward scenario does not justify a Sell rating in our view. While our overall cautious investment thesis has not changed on DRL, we do believe a transaction with First Bancorp (FBP-$0.38-Neutral) is potentially an option and could provide a boost to the shares should the deal
succeed. In addition, given the company's focus on residential mortgage loans where historical loss rates have been below 1% combined with the recently enacted housing stimulus plan places DRL in a relatively more stable credit position."

Shares of DRL lost 1 cent yesterday to close at $1.29.