"Above-average" asset-sensitivity, "outsize" potential benefits from deregulation, and a cheap valuation are behind analyst Matthew Keating making TCF Financial (TCB +0.8%) a Top Pick, replacing Signature Bank (SBNY +0.3%).
Upgraded to Overweight is BankUnited (BKU +1.9%), with Keating noting a valuation discount, but loan growth expectations nearly double that of peers.
Upgraded to Equalweight from Underweight is Synovus (SNV +0.4%).
Downgraded to Underweight are Dime Community (DCOM -7.2%) thanks to its liability sensitivity in a rising rate environment.
Also cut to Underweight is Investors Bancorp (ISBC -1.5%), with Keating also noting its liability sensitivity.
Also on the upgrade list: Cullen/Frost (CFR +1.1%).
Also on the downgrade list: Fulton Financial (FULT -0.3%).
There are multi-year highs again across the sector as interest rates continue to rise, but, maybe more importantly, bank investors begin to envision a far less heavy regulatory burden.
In a speech Friday described by FBR's Ed Mills as "going out swinging," Fed Governor Daniel Tarullo set himself up as the chief defender of the status quo, saying he doesn't see a "sound economic case" for rolling back the post-crisis regulatory regime.
Whether anyone hears him much going forward is a different story, given names like former BB&T boss John Allison or former FDIC chief Thomas Hoenig being thrown around as possible Fed vice chairmen for bank supervision. Both Allison and Hoenig are fans of following simple leverage ratios, but Tarullo says just focusing on those is "inadequate and dangerous."
Tarullo's voice will also have to rise above that of Trump's Strategic and Policy Forum led by Blackstone's Stephen Schwarzman.
Bank of America (BAC +2.6%), Wells Fargo (WFC +1.4%), JPMorgan (JPM +1.6%), Citigroup (C +2.3%), Goldman Sachs (GS +2.1%), U.S. Bancorp (USB +1%), Regions Financial (RF +1.5%), Synovus (SNV +1.1%), SunTrust (STI +1.4%), Primerica (PRI +2.1%), Bank of New York (BNY +1.4%), State Street (STT +1.1%)
The details aren't available, but one can be pretty sure a common theme through all of the downgrades is a "lower for longer" interest rate scenario, and for any Texas or energy-exposed banks a possible topping in oil prices.
Comerica (CMA -0.1%) is cut to Underperform from Neutral, Franklin Financial (FSB) to Neutral from Buy, Lincoln National (LNC -0.8%) to Neutral, Principal Financial (PFG +0.5%) to Neutral, Prudential (PRU -0.4%) to Underperform, Regions Financial (RF +0.5%) to Neutral, Synovus (SNV +0.4%) to Neutral, Unum Group (UNM -1.2%) to Underperform, and Zions (ZION -0.3%) to Underperform.