Bernstein Turns Bullish On 2 Regional Banks

The bullish case for two regional banks, SunTrust Banks, Inc. STI and M&T Bank Corporation MTB, can now be made after a pullback in both stocks, according to Bernstein.

The Analyst

Bernstein's John McDonald upgraded SunTrust Banks from Market Perform to Outperform with a price target lifted from $75 to $76.

The analyst upgraded M&T Bank from Market Perform to Outperform with a price target lifted from $200 to $210.

The Thesis

Both SunTrust and M&T are "quality" franchises backed by solid management teams that positioned their respective companies to take advantage of rising short rates, a strong U.S. economy and a more favorable regulatory backdrop for smaller banks, McDonald said in the Wednesday upgrade note.

In SunTrust's case, investors should be bullish on stock for the following reasons, McDonald said:

• Expectations for better rate sensitivity than what was implied in recent disclosures.
• Room for continued efficiency improvements above the 60-percent 2019 target.
• Strong exposure to the consumer lending segment.
• A more "internally focused" strategy implies less risk of an unfavorable M&A deal. 

The case for M&T's stock is is based on the following factors, the analyst said: 

• M&T's recent weakness is attractive for a "quality compounder."
• A track record of top-tier shareholder returns.
• Attractive capital management and solid credit.
• A focus on profitability over growth.

Price Action

SunTrust shares were down 1.12 percent at the time of publication Wednesday afternoon, while M&T shares were down nearly 1 percent. 

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