First Union Corp. might not be done with credit-quality problems and rising expenses, but some analysts are beginning to see light at the end of the tunnel.

Katrina Blecher, a managing director of research at Sandler O’Neill & Partners, initiated coverage for the Charlotte, N.C., company with an “outperform” rating, saying First Union might not grow as much as management predicts but that its restructuring is moving it up the right track. Shares of First Union have been battered in the past year. They trade at a 10% discount to other superregionals, Ms. Blecher wrote in her report, reason enough to bet on a recovery. Still, Ms. Blecher did not give the stock a lot of upside potential — 3% growth is her target.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.