Shares of several thrifts gained ground Tuesday after positive comments from a Wall Street analyst.

The New York investment boutique Keefe, Bruyette & Woods Inc. upgraded three stocks, raising Charter One Financial Inc. and Washington Federal from "market perform" to "outperform" and Astoria Financial Corp. from "outperform" to "buy." The three banks all have exceptional asset quality, compelling valuation, isolation from the capital markets, and balance sheets that benefit from lower interest rates, the analyst Thomas F. Theurkauf said in a report outlining the upgrades.

A slowing U.S. economy could benefit the banks, Mr. Theurkauf said, because of their sensitivity to the interest rate cycle. A meaningful slowdown, the thinking goes, could accelerate the Federal Reserve's eventual plan to reverse its series of interest rate increases.

Astoria Financial of Lake Success, N.Y., with assets of $22.2 billion, has spent most of the past year repositioning itself by disposing of securities and holding back on loan growth. Charter One, the Cleveland thrift with $32 billion of assets, has similarly transformed itself.

The three upgraded companies are "sort of rainy-day names," and if conditions improve, "I don't know that they would outperform," Mr. Theurkauf said. If the economy bounces back and then remains strong, and the Federal Reserve increases interest rates, "I don't think you want to be in" those stocks, he said.

The jury is still out on Pacific Century Financial Corp., which has been saddled with a troubled loan portfolio. The bank last week held its first meaningful communication with investors since naming Michael O'Neill chairman and chief executive officer, a conference call that Lehman Brothers analyst Brock Vandervliet described as "more conceptual than specific."

In a note issued after the conference call, Mr. Vandervliet said he expected Pacific Century, which owns Bank of Hawaii, to review each of its businesses in the coming months and make an announcement about its strategic direction when it reports first-quarter earnings in the spring.

Until then, Mr. Vandervliet said, shares in Pacific Century are likely to trade in a range. He maintained a "neutral" rating on the shares, trimming his target price to $14.50, from $15. Pacific Century shares were trading down 0.89% mid-afternoon Tuesday.

Also Tuesday afternoon, Astoria Financial was up 1.53%, Charter One was up 2.58%, and Washington Federal was down 0.29%.

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