UPDATE: Compass Point Initiates Sterling Financial Corporation at Neutral on Revenue, NII Outlook

Compass Point initiated coverage on Sterling Financial Corporation

with a Neutral rating and a $20 price target. Compass Point noted, "In order for us to see additional upside, loan growth would need to exceed our 5% annual estimate or the company's mortgage banking market share would need to increase beyond our expectation (30% share increase). Our $20 price target is based on our FY14 EPS estimate of $1.23 and an 8.5% required return. Our price target implies approximately 12x our EPS estimate plus $5.00 for excess capital (see page 10 for more details). We issue FY12/13/14 EPS estimate of $6.36, $1.30, and $1.23, respectively. We are notably below FY14 consensus due to our expectations for declines in mortgage banking revenues (declining volumes and gain on sale spreads) and persistent NII headwinds." Sterling Financial Corporation closed at $21.31 on Thursday.