HALISTER1: Start Covering Bank Short Positions, Baird says; Upgrades Zion

Start Covering Bank Short Positions, Baird says; Upgrades Zion

(Bloomberg) -- Baird recommends investors halt bank shorting positions as the KBW Bank index of leading banks and thrifts underperforms the S&P 500 and valuation multiples remain lackluster, Baird analyst team led by David George writes in a note. 
  • Underperforms SPX by ~8% QTD, ~12.4% YTD
  • Valuation multiples "not compelling enough to aggressively buy banks" 
    • Median second NTM P/E (~11.5x) and NTM PPNR (~7x)
  • Investor 3Q expectations revised downwards amid slower loan growth, yield curve flattening and lower market activity  
  • Upgrades Zions Bancorporation to neutral from underperform as it reduces its efficiency ratio and boasts substantial excess capital, causing shares to lag
    • Downgraded earlier last month, which effectively brought shares back to reasonable territory
  • NOTE: ZION 14 buys, 15 holds, no sells; avg PT $50: Bloomberg data
To contact the reporter on this story: Kristy Westgard in New York at kwestgard1@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Christiana Sciaudone

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
ZION US (Zions Bancorporation)

People
David George (Robert W Baird & Co Inc)

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