Regional Banks Gain Following Note from Miller Tabak
Analyst Thomas Mitchell downgraded shares of Regions from Buy to Hold and upgraded shares of First Midwest from Sell to Hold.
The analyst “remains broadly constructive on regional bank stocks for 2014…but the group will be hard put to show particularly strong earnings progress unless and until long-term interest rates rise enough to underpin solidly higher net interest margins -- a development we believe is highly likely to occur, but whose timing remains hard to pin down.”
Should long-term interest rates remain relatively unchanged, “healthier capital and leverage ratios are likely to keep driving bank valuations modestly higher,” said Mitchell.
Increased mergers and acquisitions activity is “long overdue” and could be a “potential catalyst for group out-performance."
Using a 13.6x 2014 earnings multiple, the analyst calculates a price target of $11.33 and $16.10 for Regions and First Midwest, respectively.
Shares of Regions are up 1.3 percent, while shares of First Midwest are up 3 percent in Tuesday's trading.
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