Amsouth Bancorp shares leaped higher Thursday, despite a downgrade from Fox-Pitt, Kelton Inc., in a strong market for banks.
Analysts are giving the Birmingham, Ala., banking company mixed reviews following a second-quarter earnings report Tuesday that met the consensus at 41 cents a share. CIBC World Markets also lowered its rating, to "buy" from "strong buy." But Lehman Brothers reiterated its "buy" recommendation Wednesday.
Fox-Pitt analyst John Balkind, who lowered his rating to "hold" from "attractive" citing decelerating revenue growth, said he is unimpressed by Amsouth's strategy. He predicted the company would have a "tough time" generating earnings. Trading in Amsouth was heavy, with 837,400 shares changing hands, up from 487,800 on Tuesday. Shares gained 43.75 cents or 2.55%, to close at $17.5625, on a day the American Banker index gained 3.59%.
Richard X. Bove, an analyst at Raymond James Financial in St. Petersburg, Fla., kept his "strong buy" rating on Amsouth. "The most important factor for banks is interest rates," he said. And since he expects the economy to cool down during the next two quarters, he thinks interest rates will come down later this year, pushing up bank stocks in general. Nevertheless, before that he predicts a bumpy ride for bank shares during the summer.
Peter J. Winter, an analyst at CIBC in New York, said he had expected more revenue growth through the merger of Amsouth and First American Corp., but said that First American is now successfully integrated. Noting he expects no further interest rate hikes this year, Mr. Winter predicted that Amsouth will surprise its investors with stronger earnings later this year.
Jason Goldberg at Lehman Brothers in New York expressed equal confidence on Tuesday. Though Amsouth's second quarter did not impress, he said Amsouth would "return to its pattern of exceeding estimates" once revenue momentum picks up in the third and fourth quarters of this year, mainly in the core business.
Keith Horowitz of PaineWebber Inc., in New York, categorizes the company as "neutral."
Banknorth Group in Portland, Maine, won an upgrade from James M. Ackor of Tucker Anthony Cleary in Portland, Maine.
After almost a year in which he rated the banking company "strong buy," Mr. Ackor downgraded the company two levels to "hold" in June. On Thursday he lifted the rating to "accumulate," just below the first tier.
Mr. Ackor said he was impressed with the second-quarter numbers, particularly the loan growth, the income growth, and the cost savings. He said that in a "clearly slowing" economy, rising interest rates are no longer a worry. Concerns are shifting towards asset quality, which, in case of Banknorth, is strong, he said.
Banknorth's shares gained 3.75 cents, or 2.48%, to close at $15.50.