Analysts Wary of Regional Bank Stocks Ahead of Potential Rate Cut

CBSH also got a bear note, which matches the general opinion on the Street

by Josh Selway

Published on Jul 8, 2019 at 11:44 AM

With Wall Street still expecting the Fed to cut interest rates at its meeting this month, brokerage firm BMO is considering what that could mean for some of the smaller banks. Specifically, in a note this morning analysts called out regional bank Huntington Bancshares Incorporated (NASDAQ:HBAN), suggesting an easing in monetary policy could be bad news for the shares of HBAN, particularly focusing on its negative impact for the company's net interest margin (NIM).

For Ohio-based HBAN, BMO cut its rating to "underperform" from "market perform," saying it's concerned about the company's profitability outlook given the NIM struggles. The brokerage firm said it prefers Regions Financial (RF) instead, while adding KeyCorp (KEY) should report a solid quarter. Meanwhile, KBW last night cut its price target on Huntington to $14 from $14.50.

The shares are trading down 0.6% in response, last seen at $13.84. This still leaves them just above the 200-day moving average that they finally overcame two weeks ago, after long-term resistance at the trendline.

There's been unusual interest in long puts on HBAN in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The equity's 10-day put/call volume ratio across these exchanges is 2.23, and ranks in the 92nd annual percentile.

Another small bank to get hit with a bear note is Commerce Bancshares, Inc. (NASDAQ:CBSH). Raymond James downgraded its opinion to "underperform" from "market perform," joining the general opinion on the Street. That is, seven analysts have "hold" ratings, and two others have "sell" and "strong sell" recommendations, versus no "buy" endorsements.

CBSH stock was last seen trading down 2.2% at $59.29, holding just below the 200-day moving average which has served as strong resistance this year. The shares have shed 4.7% over the past 12 months, and short sellers have been moving in. Short interest jumped 40.5% in the last two reporting periods, now accounting for 12.1 days' worth of buying power, based on average daily trading volumes.

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