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Understanding Analyst Expectations for Regional versus Large Banks

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Nov. 17 2015, Updated 3:06 p.m. ET

Analyst recommendations for large banks

Of the 275 analysts that cover the eight large banks in the Financial Select Sector SPDR ETF (XLF), there are 166 “buy” ratings assigned, ten “sell” ratings, and 99 “hold” ratings as of November 13. With ~50% of analysts recommending that investors buy, we can surmise that analysts are positive about the sector in the long term based on the robust fundamentals of these firms and on their expectations of a rate hike in the December FOMC (Federal Open Market Committee) meeting.

Wall Street (SPY) analysts are the most upbeat about Citigroup (C), which received “buy” ratings from 29 analysts among the 34 analysts who cover the company’s stock. Shares of Citigroup have returned -1.7% in 2015 so far as of November 13.

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In contrast, analysts are most negative about Goldman Sachs (GS), which received the fewest “buy” recommendations. Shares of Goldman Sachs has received just four “buy “ratings from the 24 analysts tracking the company, whereas Comerica has received 12 “buy” rating among the 31 analysts tracking its stock. Comerica has received two “sell” ratings and 17 hold ratings. Shares of Goldman Sachs have returned -1.8% YTD (year-to-date) as of November 13.

Analyst recommendations for regional banks

Of the 242 analysts covering the seven regional banking stocks in the Financial Select Sector SPDR ETF (XLF), there are 107 “buy” ratings assigned, six “sell” ratings and 129 “hold” ratings. Wall Street (SPY) analysts are most upbeat about Regions Financial Corporation (RF) and BB&T Corporation (BBT), as they have both received 19 “buy” ratings. There are 35 analysts currently tracking Regions Financial while 37 Wall Street analysts are tracking BB&T.

As the graph above shows, analysts are most negative about M&T Bank Corporation (MTB) and SunTrust Banks (STI), as these stocks have received the least “buy” ratings. Shares of M&T Bank have received just ten “buy “ratings from the 28 analysts tracking it, whereas SunTrust has received 13 “buy” ratings among the 35 analysts tracking its stock as of November 13. Shares of M&T Bank and SunTrust have returned -2.5% and 0.2%, respectively, YTD.

But could these banks’ stock be nearly overbought in mid-November 2015? Continue to the next part of this series to find out.

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