First Connecticut Bancorp: Revisit On A Pullback

• First Connecticut Bancorp Inc FBNK shares have been range-bound over the past year, and are up 2 percent year-to-date.
• Keefe, Bruyette & Woods analyst Travis Lan downgraded the rating from Outperform to Market Perform, with a price target of $17.50.
• Following the recent appreciation in shares, Lan said there is limited upside to the target price.

First Connecticut Bancorp has outperformed the Nasdaq Bank Index by 10 percent over the past two weeks and by 17 percent over the last three months. Analyst Travis Lan mentioned that the outperformance has left “below-average upside” to the price target.

Currently, First Connecticut Bancorp’s shares are trading at a 15 percent discount to peers, while Keefe, Bruyette & Woods’ 2016 ROA projections are 45 percent lower than peers.

Saying that the downgrade is based on valuation, Lan added that the long-term thesis for the company remained unchanged. “Our positive long-term view of FBNK shares reflects the bank's organic growth capacity which should support positive operating leverage on a relatively stable expense base, and exposure to rising interest rates.”

In the report Keefe, Bruyette & Woods noted that First Connecticut Bancorp’s growth outlook is supported by:

1. Capital flexibility
2. Potential for gaining market share from larger in-market players
3. Capitalizing on continued disruption at other in-market community banks

Since the long-term view of the company remains intact, “we could revisit FBNK” in the event of a “meaningful pullback” in its shares, Lan commented.