KBW Upgrades One Large Regional Bank, One Insurer After Black Monday

Investors looking to add (or initiate) exposure in the financial sector following Monday's stock market sell-off should consider Christopher Mutascio of KBW two latest picks which consists of a large regional bank and an insurer.

Upgrading Regions Financial To Market Perform

Regions Financial Corp RF is a financial holding company that conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank.

Mutascio upgraded Regions Financial to Market Perform from Underperform with a newly established $10.50 price target. The analyst noted that while there is downside risk to consensus earnings per share estimates, the risks are "reflected in the current valuation" with the stock trading below 10x his 2017 earnings per share estimate.

Mutascio also noted that the stock's potential upside of 20 percent is still less than the 24 percent average for the rest of the regional banks under his coverage, but the gap has "narrowed nicely" since the stock was previously downgraded and no longer warranted an Underperform rating.

XL Group Upgraded To Outperform

XL Group plc XL is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises.

Mutascio upgraded XL Group to Outperform from Market Perform with a price target raised to $44 from a previous $42. The analyst noted that the stock has now established at an "attractive" entry point following the recent "significant" sell-off.

Mutascio continued that XL Group is trading at 9.7x his 2016E earnings per share and 93 percent of its second quarter diluted book value per share. This compares to a peer median of 14.1x 2016E earnings per share 110 percent of diluted book value.

Mutascio noted that he previously downgraded the stock last December after the company confirmed its interest in acquiring Caitlin which wasn't viewed well. Since then, the analyst stated he hasn't given XL's management team "enough credit" given his "general antipathy" to insurance company M&A.