With Little Remaining Upside Seen For Cathay General Bancorp, BMO Downgrades

Cathay General Bancorp CATY shares have gained about 18 percent year-to-date, including a 26-percent gain over the past three months. This prompted BMO Capital Markets to revisit its rating on the shares.

The Analyst

BMO Capital Markets analyst Lana Chan downgraded shares of Cathay General Bancorp from Market Perform to Outperform.

The Thesis

Cathay General Bancorp's fundamentals remain positive but are now fully reflected in the valuation, Chan said in a Thursday note. (See Chan's track record here.) 

The company is on track to produce above-average loan growth in the range of 8 percent-plus in 2017, Chan said. Cathay General Bancorp remains a capital return story, Chan said. 

Apart from the valuation, BMO Capital Markets also predicts there are potential EPS growth headwinds in 2018 and beyond from the normalization of credit costs and interest-bearing deposit betas.

Cathay General Bancorp does not rank high among banks that could substantially benefit from tax reform and regulatory relief, Chan said. 

BMO left its 2017 and 2018 core earnings per share estimates unchanged at $2.44 and $2.65, respectively.

Within its smid-cap bank universe, BMO said it now prefers Signature Bank SBNY and BankUnited BKU.

The Price Action

The stock is inching closer to BMO's $45 price target and trading at a roughly in-line valuation on a forward P/E multiple basis, Chan said. Historically, the stock traded at a 5-7 percent discount, relative to the peer group.

At the time of writing, shares of Cathay General Bancorp were down 1.35 percent at $43.91.

Related Links:

A Leveraged Idea For The December Fed Meeting

While Big Banks Fight Regulations, Fintech Conquers Them

Photo from Wikimedia. 

Posted In: BMO Capital MarketsLana ChanAnalyst ColorDowngradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.