Magazine article American Banker

AmSouth Downgraded in Spite of Credit Gains

Magazine article American Banker

AmSouth Downgraded in Spite of Credit Gains

Article excerpt

Charles N. Ernst, an analyst with Putnam Lovell Securities Inc., on Thursday downgraded AmSouth Bancorp from "buy" to "hold," calling the company's improved credit-quality picture unsustainable if economic uncertainty continues.

Mr. Ernst said that he does not "see anything wrong" with AmSouth, but that "the stock had its run."

The Birmingham, Ala., company, which has $38 billion of assets and operates in six southern states, among them Tennessee and Florida, has had problems stemming from exposure to national syndicated loans.

Such credits made up 10% of its portfolio at one point, though last year they hovered around 5% of total loans outstanding, according to analysts. Since then the company has managed to ratchet down its syndicated exposure to 2% of loans, Mr. Ernst said.

And while commercial and industrial loan growth was generally muted across the industry, AmSouth, like many regional banks, achieved good results in its consumer loan portfolio, particularly in indirect auto and home equity loans.

"They are growing their home equity loan portfolio aggressively," Mr. Ernst said. "That should have a positive impact on credit quality." In the second quarter net interest income was up 11.3% from 2001, to $382 million, and the company reported earnings of 42 cents per share, up 17%, according to its earnings statement of July 16, beating analysts consensus by a penny.

Mr. Ernst said that AmSouth may beat expectations in the third quarter too. He estimates earnings per share of 43 cents, in line with the consensus, according to Thomson First Call. …

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