Oppenheimer Assumes Coverage on Three Mid-Size Regional Banks

In its Tuesday morning summary Oppenheimer assumed coverage Fifth Third Bancorp FITB, KeyCorp KEY and SunTrust Banks STI. SunTrust Banks Oppenheimer has assumed coverage of SunTrust by maintaining an Outperform rating and setting a $43.00 price target. Analyst Chris Kotowski began by stating, "We think that SunTrust has on of the most attractive franchises among the mid-sized regional banks." In support of this claim, Kotowski listed a number of key points regarding SunTrust including:

• 1Q14 EPS of $0.73 beat estimates.
• Expenses came in at $1,321M (ex impairment) vs. estimated $1,392M
• Total revenues only slightly weaker than expected ($1,995M vs. $2,002M)
• Continued credit improvement, with both NPAs and NCOs declining.
• Drop in core efficiency ratio from 66 percent to 64.9 percent last quarter

Fifth Third Bancorp Oppenheimer assumed coverage of Fifth Third with a perform rating but has not set a price target as of now. To begin, Kotowski noted Fifth Third's 1Q14 EPS of $.036 came in under Oppenheimer's previously published estimate of $0.41 and stated, "The key takeaway is that the revenue environment remains challenging." Kotowski again listed what he sees as key points to consider regarding Fifth Third. These include:

• Revenue and expense items are in line with trends across the industry, expenses fell 8 percent year-over-year vs. a 6.5 percent year-over-year reduction in core revenue.
• Net charge-offs $68 million higher than expected. $60 million of which were related to three loans in the C&I portfolio.
• NPAs were down in both consumer and commercial.

KeyCorp Oppenheimer assumed coverage of KeyCorp by maintaining a Perform rating and as of now has not set a price target. Kotowski provided a list of key points in regard to KeyCorp:

• Total revenue was $35 million below estimates at $998 million due primarily to spread income and fees, which is in line with industry trends.
• Expenses and net charge-offs were both $20 million below estimates, making the bottom line fall very close to expectations
• An Efficiency ratio of 65.9 percent and 63.2 percent modeled for 2015 leaves room for improvement.