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Using the Forecaster Model In 2006, geography was destiny - and the metrics were misleading. It was a winning strategy to 'avoid' California and Oregon and 'buy' Texas and Oklahoma. The stocks that the analyst liked did not out-'total return' the stocks the analysts did not like. The low yielders failed to out-return the high yielders. Nor was buying the high P/E stocks or high Price/Book stocks a winning strategy. In a sector where the dividend payout ratio varies from 21% to 80%, it is not a surprise that the dividend discount model fails to be predictive. This sector sells at a fairly consistent P/E ratios despite wide variations in CAGRs. That is not logical. And the CAGRs also fail to be predictive of the stocks with high price to book ratios. That is not logical. I am not giving up hope that this sector can be forecasted. But my readers should be pessimestic about the predictions in the forecaster spreadsheet until it shows more signs of some success. This is the link to the 2006 stats for this sector, showing the projections based on 2006 begining of the year stats - along with the 2006 returns in the 'forecasting' spreadsheet which is the last of five spreadsheet posted - or roughly in the middle of the long page. This is the link to the 2007 stats page. Zion's stock rises after $250 million sale of 7.2 million shares AP 9-12 Shares of Zions rose Friday [9-12] after an analyst said the regional bank's sale of 7.2 million shares for $250 million this week should alleviate concerns over capital levels. RBC Capital Markets analyst Joe Morford said the deal should alleviate some investor concerns about the adequacy of Zions' capital levels. Morford also wrote that the deal puts Zions in a better position to book more of the well-priced and structured loan demand it's seeing. Morford reiterated his "Outperform" rating for Zions and left its 12-month price target unchanged at $35. Meanwhile, Suntrust Robinson Humphrey analyst Jennifer Demba reiterated a "Neutral" rating for Zions and reduced its estimated for the company. While the additional capital is a positive for the stock, Demba wrote the levels still remains in line with peers. High Defaults Await U.S. Option ARMs as Loan Recasts Approach Businesswire 9-02 Many borrowers of U.S. option adjustable rate mortgages (ARMs) will soon have a substantially more difficult time making their increased monthly mortgage payments, according to Fitch Ratings in a special report. This is because many mortgages underlying recent vintages will start reaching their maximum allowable debt limits and will reset to a higher payment (recast) earlier than expected. Fitch expects roughly $29 billion to recast to higher monthly payments by the end of 2009 and an additional $67 billion to recast in 2010. Of this, approximately $53 billion is attributed to early recasts. At recast, the mortgage payment is increased to ensure full amortization of the loan by maturity. Though recent declines in the 12-month Treasury average (MTA) rates have mitigated some risks, the majority of option ARM borrowers have elected to make the monthly minimum payment over the past 24 months. As a result, a large number of these loans, especially those with 40-year amortization and 110% principal caps are expected to reach their recasts before the end of the five-year mark. This will likely cause levels of 90-day plus delinquencies, currently ranging from 10% to 24%, to more than double after recast for 2004-2007 vintage loans, according to Group Managing Director and U.S. RMBS group head Huxley Somerville. Fitch estimates that the potential average payment increase on the re-casting loans to be 63%, representing on average an additional $1,053 due each month. "The combined impact of payment shock, negative amortization, declining home prices and restricted availability of mortgage credit may leave many option ARMs' borrowers unwilling to continue paying their mortgage," said Somerville. "Also, because of their use as an affordability product, option ARM defaults will likely spread into higher priced neighborhoods, as many borrowers leveraged the very low minimum monthly payment to buy more expensive homes." Fitch's rating criteria and base case loss expectations over the past several years have reflected the substantial risk of a large payment shock associated with the Option ARM product and also accounted for the higher likelihood of default and loss due to the negative amortization feature. As a result, Fitch has only rated approximately 5% of option ARM RMBS since 2004 because of its more stringent assumptions and recognition of the product's high risks. Ratings & Dividend Changes - September On 9-24 GBCI declared a dividend of $.13/share payable on October 16, 2008 to owners of record on October 7, 2008. On 9-02 Fox Pitt Upgraded ZION from In Line to Outperform. On 9-08 Friedman Billings Upgraded EWBC from Market Perform to Outperform. On 9-08 Friedman Billings Upgraded RF from Underperform to Market Perform. On 9-08 Friedman Billings Upgraded UCBH from Market Perform to Outperform. On 9-08 Friedman Billings Upgraded ZION from Market Perform to Outperform. On 9-09 B. Riley & Co Downgraded PRSP from Buy to Neutral. On 9-09 B. Riley & Co Downgraded CATY from Buy to Neutral. On 9-09 Sterne Agee Downgraded CNB from Hold to Sell. On 9-09 Sterne Agee Downgraded ZION from Hold to Sell. On 9-10 Keefe Bruyette Upgraded RF from Market Perform to Outperform. On 9-15 Sterne Agee Downgraded WABC from Hold to Sell. On 9-15 Sun Trust Rbsn Humphrey Downgraded WTNY from Neutral to Reduce. On 9-17 Stifel Nicolaus Downgraded ZION from Buy to Hold. On 9-19 RBC Capital Markets Upgraded PCBC from Underperform to Sector Perform. On 9-22 Stifel Nicolaus Downgraded GBCI from Hold to Sell. On 9-22 BMO Capital Downgraded PRSP from Outperform to Market Perform. On 9-24 Friedman Billings Downgraded CYN and PACW from Market Perform to Underperform and Keefe Bruyette Downgraded WTNY from Outperform to Market Perform. On 9-25 Keefe Bruyette Downgraded PRSP from Outperform to Market Perform. On 9-29 Noble Financial Initiated CYN at Buy; Initiated PCBC at Buy; Initiated UCBH at Buy; Initiated ZION at Buy; Initiated CATY at Hold; Initiated EWBC at Hold; Initiated PACW at Hold; and Initiated UMPQW at Hold. On 9-23 Citi Investment Research analyst Greg Ketron cut his rating on Regions Financial to "Sell" from "Hold" and also cut his 2008 and 2009 earnings estimates because of an expected increase in loan-loss provisions and credit costs. "Government intervention in the form of the short-selling ban and the proposed troubled asset relief plan has led bank stocks being overvalued versus fundamentals, including Regions Financial," Ketron wrote in a research note. Ketron said plans by the government to buy troubled assets from banks would likely set a floor for ultimate losses at banks, but would not relieve near-term credit pressures at Regions Financial and other banks. And, Ketron said Regions Financial's current operations do not warrant the recent rise in share prices. Regions Financial is likely to face rising losses from its residential and multifamily lending portfolios, while net interest margin is likely to narrow. Ketron cut his 2008 earnings estimate to $1.32/share from $1.40/share. He reduced his 2009 estimate to $1.25/share from $1.45/share. Analysts polled by Thomson Reuters forecast earnings of $1.33/share for 2008 and $1.45/share for 2009. Ratings & Dividend Changes - August RBC Capital Markets analyst Joe Morford trimmed his full-year profit estimate on ZION, but said the regional bank should survive the economic downturn better than most. After meeting with ZION's management, Morford adjusted his full-year earnings estimate to $2.95/share from $3.20/share to account for greater securities losses, lower fee income and a slight drop in loan growth. Analysts polled by Thomson Financial, on average, forecast a profit of $3.01/share in 2008. On 8-04 Sun Trust Rbsn Humphrey Downgraded CNB from Buy to Neutral. On 8-07 JP Morgan Downgraded TRMK from Neutral to Underweight. On 8-14 Ladenburg Thalmann Downgraded FHN from Buy to Neutral. On 8-15 Banc of America Sec Initiated CYN at Neutral. On 8-19 Sterne Agee Initiated WTNY at Hold. On 8-27 Sterne Agee Initiated ZION at Hold. On 8-12 UCBH declared a dividend of $0.04/share payable on October 10, 2008, to stockholders of record as of the close of business on September 30, 2008. On 8-27 WTNY declared a dividend of $0.31/share payable on October 1, 2008 to shareholders of record as of September 15, 2008. Home Page Factoids Previous Update |