Sterne Agee Gives Update On International Bancshares Corp. Following Earnings Report

Sterne Agee continues to view International Bancshares IBOC as having limited downside the closer the shares approach TBVPS, and for longer-term shareholders we believe IBOC represents a potential solid holding. We have been remiss to be more constructive on the name given limited valuation expansion catalysts; in addition to regulatory and spread revenue challenges, Sterne believes perceived credit quality concerns may continue to be a headwind until the sizable construction portfolio shrinks. Sterne notes 1Q11 earnings overall were favorable, as credit was overall a positive and profitability held up well despite decreased pretax, pre provisioning earnings. Sterne Agee is increasing FY11E by $0.02 to $1.65 per share to reflect higher earnings in 1Q than expected. Sterne is trimming FY12E by $0.13 to $1.78 per share mostly related to more sedate revenue growth expectations. Sterne's overall modeling continues to be for modest atrophy in profitability given overall revenue challenges. Sterne Agee has a Neutral rating on International Bancshares Corp IBOC closed Friday at $16.53