Magazine article American Banker

Barnett Stock Drops after a Downgrade from Goldman Sachs

Magazine article American Banker

Barnett Stock Drops after a Downgrade from Goldman Sachs

Article excerpt

Shares of Barnett Banks Inc. fell on Wednesday after the Florida bank was downgraded by Goldman, Sachs & Co. on concerns about revenue growth.

The move came just a day after the Jacksonville banking company, which is Florida's largest, reported a 54% increase in fourth-quarter earnings.

Barnett was off $1.375 to $40.2 5, on Wednesday.

The stock is currently 20% below its 52-week closing high of $50.375, which was reached last March 10 at a moment when bank stocks in general were racking up very strong gains.

Goldman banking analyst Sally Pope Davis said she reduced her investment opinion for Barnett to "market performer" from a prior rating of "moderate outperformer."

A Continuing Trend

Ms. Davis said she acted because the bank's fourth-quarter results confirmed the ongoing weakness in its revenues.

"The revenue trend is not new," the analyst said. The difference from previous quarters is that the offsetting benefits of falling expenses "are starting to diminish."

Ms. Davis also expressed concern that Barnett's fourth-quarter loan-loss provision of $19 million is "below the normal running rate."

In particular, this figure did not appear to accommodate any new loan growth. "At some point, they'll have to return to a normal rate in this category," she said.

A falling loan-loss provision provides a powerful stimulus to bank earnings while a rising provision can be a significant drag on results.

Fresh Loan Growth

In fact, Barnett enjoyed fresh loan growth during the fourth quarter, which the Goldman analyst said was "very encouraging but not as strong as we are seeing in other southeastern banks."

A Barnett spokesman, Robert L. Stickler, had no comment on the Goldman analyst's remarks, but did clarify another issue that appeared to be hurting Barnett's stock.

He said Allen L. …

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