Why KBW Is Initiating HomeStreet At Outperform

In a report published Thursday, analyst Jacquelynne Chimera of Keefe, Bruyette & Woods initiated coverage of

with an Outperform rating. The price target was set to $28. Although HomeStreet's stock is trading at a discount to its peers, the analyst expects the gap to narrow as the company's profitability and earnings diversity improve, driven by efficient growth. According to Keefe, Bruyette & Woods, "The downward movement in long-term rates that spurred an increase in refinance volume is a benefit to HomeStreet's earnings stream given its robust mortgage banking platform." In fact, the analyst expects this trend to continue into Q2 and possibly 2H15, driving upside to the EPS estimates for the company. HomeStreet has successfully been able to grow its footprint over the past few years, leading to organic growth in its loan portfolio of more than 20 percent in 2014. With new retail branches and loan office continuing to open through 2015, the analyst expects the positive loan momentum to continue. In addition, the management is committed to improving HomeStreet's operating efficiency in order to raise overall profitability.