Morgan Chase Analyst Upgrades 4 Regional Banks
Schmelkin, Alissa, American Banker
Michael Granger, J.P. Morgan Chase & Co.'s regional banking analyst, upgraded four banking companies Friday, saying the widespread expectation of an economic recovery this year bodes well for the sector.
Mr. Granger upgraded SouthTrust Corp. of Birmingham, Ala., and Comerica Inc. of Detroit to "buy" from "long-term buy" and said he expects both companies to post long-term growth in per-share earnings, with below-average earnings volatility. He also raised his price targets for both companies, SouthTrust to $29 from $25 and Comerica to $75 from $65.
Mr. Granger also upgraded Commerce Bancshares of Kansas City, Mo., and Mercantile Bankshares of Baltimore to "buy" from "market performer."
Summing up his rating changes in a telephone interview Friday morning, Mr. Granger said that he expects credit quality problems to hurt the earnings of regional banking companies less than they did last year. More stability in inflation also bodes well for the regionals, he said.
SouthTrust is widely viewed as liability-sensitive, Mr. Grange said, so its earnings may grow more slowly when interest rates stop declining. However, he added, he thinks SouthTrust will get "more than their fair share of loan growth out of the economic recovery, and that will drive revenue growth."
Deterioration in credit quality, especially among manufacturing companies, has hurt Comerica, a big commercial lender, Mr. Granger said. …