Lehman Brothers upgrades Union Bank of California (UB) to Overweight from Equal weight, citing the bank’s “preparedness for the currently tought credit environment”:
In 1Q08, it significantly increased its loan loss provisioning assumptions. We think that the company has been more aggressive in recognising a weaker credit environment, compared to other regional banks, and can comfortably afford higher credit costs. While capital ratios remain good, in our view, efforts to incrementally conserve capital should also be a benefit. Longer-term, we view its focused presence in California as a strength. Our 2008 EPS estimate is $4.06 (-$0.14) for continuing operations and our 2009 EPS estimate is $4.65… Loan growth should be better than peers and its net itnerest margin should be relatively stable, with improving loan spreads offsetting deposit competition. Our revised price target is $60 (+$6).
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