James Abbott, an analyst at Friedman, Billings, Ramsey & Co. Inc., upgraded shares of PFF Bancorp Inc. and said pressure on the Rancho Cucamonga, Calif., company's net interest margin is a short-term problem.
The $4.6 billion-asset company's niche in construction lending in southern California offers potential for substantial loan growth, Mr. Abbott wrote in a research note issued Thursday.
He wrote that he raised his rating on PFF's stock to "outperform," from "market perform," because of his research and the recent performance of the company's stock. In its second quarter, which ended Sept. 30, its margin contracted 21 basis points from a year earlier.
In its earnings conference call last week, PFF managers said it expected the margin to contract another 20 basis points this quarter as residential construction slows.
However, Mr. Abbott wrote, "Investors probably have overlooked the potential for commercial construction loan growth acceleration to partially offset residential construction deceleration."
Kevin McCarthy, PFF's president and chief executive, did not return calls for comment.
