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JPMorgan Chase & Co. analysts on Friday downgraded three regional bank stocks and said they’re moving their outlook for the sector to neutral based on rising expectations of a recession as well as more aggressive interest rate hikes from the U.S. Federal Reserve. JPMorgan cut its ratings on Live Oak Bancshares Inc.
LOB,
and Huntington Bancshares Inc.
HBAN,
to neutral from overweight and downgraded HBT Financial Inc.
HBT,
to underweight from neutral. “On LOB, while our call on the stock has been to buy at the point of maximum pessimism, with the Fed now adopting a much more hawkish posture, we now believe this point remains on the road ahead rather than in the rear-view mirror,” JPMorgan analysts said. “For HBAN and HBT, despite both companies having peer-leading [customer loyalty], they have yet to translate this premium experience into stronger top- and bottom-line growth versus peers.” Analysts said they are neutral on regional banks, partly because bank stock valuations are already discounting a 50% probability of a recession and inflation could ease back. Analysts spotlighted First Republic Bank
FRC,
Signature Bank
SBNY,
SVB Financial Group
SIVB,
Silvergate Capital Corp.
SI,
and Cullen/Frost Bankers Inc.
CFR,
as their top picks in the sector. The KBW Bank Index
BXK,
is down 23.6% in 2022, compared to a drop of 20.6% by the S&P 500
SPX,
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