Magazine article American Banker

Analyst Downgrades 5 Small-Bank Stocks

Magazine article American Banker

Analyst Downgrades 5 Small-Bank Stocks

Article excerpt

Shares of large banking companies have taken a beating in the last three months, but a rally of sorts has lifted those of smaller ones high enough to trigger worries that prices will outpace returns.

For the most part, these smaller companies have avoided the credit quality issues and slowdown in profit growth that have plagued the larger banks. Their share prices have risen as investors have fled risk in search of value.

But the rise may have reached a limit. On Wednesday, Jeffrey A. Miller, an analyst and portfolio manager at Acadia Research Group in West Conshohocken, Pa., downgraded five of the 13 banks he covers because they have hit his price targets.

He cut Texas Regional Bancshares, Zions Bancorp, Banknorth Group Inc., Charter One Financial Inc., and Dime Bancorp to "hold" from "buy." All five have delivered high returns to investors, Mr. Miller said, but "the risk/reward on a fundamental basis is not as appealing as it was at the beginning to 2000 or even two weeks ago."

Banknorth stock fell 5.96% on Wednesday, to $18.75; Dime 1.2%, to $25.8125; Texas Regional 1.96%, to $31, and Zions 0.94%, to $59.50. Charter One was unchanged, at $26.375.

Financial stocks made a good start in early trading on Wednesday, but the sector turned negative in the afternoon as the presidential election battle moved into its final stage and economic data showed an unexpected slowdown in retail sales.

American Banker's index of the 50 largest banks ended down 0.37%. Its index of 225 banks was down 0.87%.

The Dow Jones industrial average rose 0. …

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