UPDATE: BMO Capital Markets Upgrades Manulife Financial Following Significantly Reduced Tail Risk

In a report published Thursday, BMO Capital Markets analyst Tom MacKinnon upgraded the rating on Manulife Financial MFC from Market Perform to Outperform, and raised the price target from $16.50 to $19.00.

In the report, BMO Capital Markets noted, “We estimate the removal of the interest rate tail risk translates into a 15% increase in MFC's P/BV versus ROE valuation multiple. As well, a 100-bp increase in interest rates adds 14 points to MFC's MCCSR (currently 217%), thus increasing the likelihood of dividend increases/share buybacks, in our view. And, although the potential earnings lift is now much smaller through efforts to reduce interest rate sensitivity, a 100-bp increase in interest rates still translates into a generally more one-time $0.22 EPS increase.”

Manulife Financial closed on Wednesday at $16.56.