Can C1 Financial Bank On A Sale? Stock Downgraded At KBW

• Shares of C1 Financial, Inc.BNK have risen 10.51 percent in the last six months, reaching a high of $20.29 on October 16.
• Jefferson Harralson of Keefe, Bruyette & Woods has downgraded the rating on the company from Outperform to Market Perform, while maintaining the price target at $21.
• Although the company reported robust quarterly results, attention is currently focused on media reports of a potential sale of the company, although the CEO has not commented on these reports.

Analyst Jefferson Harralson mentioned that media reports of C1 Financial looking at a potential sale sent the shares up 8 percent to the $20 range on Friday. Although the CEO stated that the company “doesn’t comment on rumors,” Harralson believes that a sale is likely.

“The potential of a sale seems well earlier from C1’s normal business plan, but it does make sense that its significant Brazilian ownership could want to liquidate assets to cover debt,” Harralson said, given that the Brazilian real has risen against the US dollar.

According to the Keefe, Bruyette & Woods report, C1 Financial might consider a sale even if it does not get the desired price, since the sale would “generate dollar liquidity for its owners.” The company might prefer the deal to be in cash, which would be favorable for a larger buyer, the report stated.

“Typically, we see foreign banks, and South American banks in particular, as interested buyers in Florida banks -- but with the volatility, these former potential buyers may not materialize in this case,” Harralson added.

For 3Q, the company reported its EPS marginally above expectations, while spread income increased 16 percent on an annualized basis, beating the estimates. Annualized loan growth was up 27 percent, with 4 bps NIM expansion. The CEO attributed the decline in loan production during 3Q to the weather.

The EPS estimate for 2015 has been raised to reflect “the 3Q beat and a higher expected NIM in 4Q.”