Market Overview

Bank Bears Bare Their Claws: Fifth Third, US Bancorp Among Downgrades


Bank investors were greeted with multiple downgrades Monday from two notable bank analysts. Here's a roundup of what was said and which stocks were downgraded.

Bank stocks have been hot over the past month having gained 10 percent to trade at post-election highs, Baird's David George commented in a report. But at the same loan growth isn't as strong as it has been in the past, the yield curve is flatter, and President Trump's fiscal agenda and progress with tax reform appears to be stalled.

Zions Downgraded

George downgraded Zions Bancorp (NASDAQ: ZION) from Neutral to Underweight with a $43 price target due to valuation concerns. Zion's forward P/E of 14x 2019E EPS stands at a premium to the 13x peer median. The company needs to show investors accelerating loan growth and improvement in operating leverage to narrow the spread in core returns versus its peers.

Related Link: Bernstein Gets Bullish On Mid-Cap Banks

Regions Financial Downgraded

George downgraded Regions Financial Corp (NYSE: RF) from Neutral to Underweight with a $13 price target amid execution risks. Specifically, as the company reaches its 60 percent efficiency ratio goal its performance in 2018 looks "challenging" without more help from higher interest rates and acceleration in its loan growth.

See Also: Cramer's Checklist To Identify A 'Sustainable' Stock Rally

Fifth Third Bancorp Downgraded

George also downgraded Fifth Third Bancorp (NASDAQ: FITB) from Neutral to Underweight as the company needs outside help to justify a premium valuation. It will likely be difficult for the company to reach its Project North Star targets without macro help and the benefits of the initiative seem to already be reflected in consensus estimates.

US Bancorp Downgraded

Bank of America's Erika Najarian downgraded U.S. Bancorp (NYSE: USB) from Neutral to Underperform with a price target lowered from $56 to $54. While US Bancorp is very much a "high quality franchise" the company is expected to deliver slower improvements in returns and capital distribution compared to its peers. Accordingly, investors should seek out "value over quality."

Citizens Financial Group Downgraded

Najarian also downgraded Citizens Financial Group Inc (NYSE: CFG) from Buy to Underperform with a price target lowered from $41 to $40. The analyst's prior bullish stance was mostly due to the bank's improving ROTCE but in the absence of another efficiency program ahead, there will likely be downward consensus revisions for 2018.

Latest Ratings for CFG

Jan 2019UpgradesNeutralBuy
Jan 2019UpgradesSector PerformOutperform
Dec 2018MaintainsOverweightOverweight

View More Analyst Ratings for CFG
View the Latest Analyst Ratings

Posted-In: bank stocks banks David George Erika NajarianAnalyst Color Downgrades Price Target Analyst Ratings


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