3 'Quite Attractive' Regional Bank Value Plays from UBS
NEW YORK (TheStreet) -- UBS analyst Stephen Scinicariello recommends three regional banks for investors seeking to limit exposure to events in Europe while minimizing regulatory worries at home.
UBS said on Tuesday that "mid-cap regional bank stocks are down 6% on average over the past quarter due to a return of concerns pertaining to global macroeconomic events," but because of "their lack of direct exposure to these risks and favorable relative positioning in the new regulatory paradigm, we continue to see several attractive opportunities."
Heading into second-quarter earnings season, Scinicariello projects for the 12 midcap banks covered by his firm sequential loan growth of roughly 2%, with "modest" pressure on net interest margins, continued improvement in credit quality and "solid expense management, "which should translate into higher pretax pre-provision run rates (+4%)."
The "provision" refers to banks' quarterly provisions for loan losses, which have a direct effect on quarterly earnings.
Scinicariello said that "regional bank valuations are attractive," at less than 1.5 times tangible book value and 12 times "forward earnings; especially considering the EPS growth we anticipate for 2013," and that "better-than-feared fundamentals should continue to lead to revaluation of the sector."