Despite A 'Fine Quarter,' KBW Downgrades Bank Of The Ozarks

Bank Of The Ozarks Inc OZRK reported fourth-quarter earnings Tuesday, with an EPS that fell in-line with the consensus estimate. 

The Analyst

Keefe, Bruyette And Woods' Catherine Mealor downgraded Bank of the Ozarks from Outperform to Market Perform and reiterated a $56 price target. 

The Thesis

The bankreported a "fine quarter," with strong growth in average loans and unfunded commitments, lower-than-expected expenses, clean credit and another 9-bps increase in the core spread, Mealor said in a Tuesday note. (See the analyst's track record here.) 

EOP loan growth was slower at 23 percent, she said.

KBW downgraded the stock because it has already moved higher, and the firm's EPS estimate is 5 percent below the consensus, the analyst said. 

The stock rebounded after the departure of executive Dan Thomas and is now trading at 14 times 2018 EPS and 2.4 times TBV, said Mealor. A decrease in the bank's balance sheet and net interest margin is projected, which could lead to a potential downside to consensus estimates, according to KBW.

The analyst expects an "intense" focus on deposit betas in 2018, which would be a headwind for the stock given its high beta. KBW decreased its 2018 EPS estimate from $3.74 to $3.70, while the research firm's 2019 estimate remains at $4.32.

The Price Action

Bank Of The Ozarks was down 2.45 percent at the time of publication. 

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