UPDATE: J.P. Morgan Reiterates Neutral Rating, Raises PT on Susquehanna Bancshares
In a report published Monday, J.P. Morgan reiterated its Neutral rating on Susquehanna Bancshares (NASDAQ: SUSQ), and slightly raised its price target from $11.50 to $12.00.
J.P. Morgan noted, “Although we believe management at Susquehanna has done a commendable job of taking the company from a near 5% ROTE in 2011 (largely driven by outsized credit costs), to a now peer leading 13% core ROTE in 2012, as we look ahead to 2013 we believe it will challenging for the company to deliver an encore. In fact, we see the full year ROTE eroding slightly to a 12.4% level for the full year of 2013. Part of the challenge in our view will be for the company to overcome the reduction in benefit from purchase accounting (which is expected to detract 7 bps from the reported margin in 1Q13) with core margin pressure running in the 6 bps range. Aside from the CD maturities coming in 2H13, the only other offset to defend spread revenue will be earning asset growth. To this end, the company is guiding to just 5% loan growth in 2013. Although the expected returns from the company remain peer leading and therefore justify the current 20% premium to peer valuation, we see little room for the company to surprise relative to the financial targets telegraphed to the market and therefore little room for the relative valuation to improve.”
Susquehanna Bancshares closed on Friday at $11.56.
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