A Credit Suisse analyst upgraded shares of CVB Financial Corp. Thursday saying the California bank is well positioned to handle the weakening credit environment.
Analyst Todd Hagerman raised his rating to "Outperform" from "Neutral," while raising his price target to $14 from $12.
Shares of CVB Financial rose $1.42, or 13.6 percent, to $11.89 in midday trading. Shares have traded between $8.40 and $13 during the past year.
CVB Financial has some exposure to weakening real estate markets since its footprint is in Southern California, Hagerman wrote in a research note. Southern California has been among the hardest hit regions of the U.S. by rising delinquencies and defaults on mortgages and declining home sales and prices.
But, the bank has minimal problems with its credit quality, Hagerman noted.
"Credit quality remains pristine and the company's residential construction exposure is" minimal and manageable, Hagerman wrote. Only about 4 percent of its loans are for residential construction.
Aside from being largely able to sidestep the mortgage and housing market problems, CVB Financial should also see its net interest margin, or profit margin from lending, improve in the coming quarters as funding costs decline, Hagerman said.
CVB Financial is also trading at a relatively attractive valuation compared to historical trading, Hagerman said. Currently, the bank is trading at more than double book value, when it has historically traded at more than triple book value, Hagerman added.
Hagerman increased his 2009 earnings estimate to 90 cents per share from 85 cents per share. The estimate was raised because of expected improvement in interest margins.
Analysts polled by Thomson Financial, on average, forecast 2009 earnings of 87 cents per share.
He kept his 2008 target unchanged at 80 cents per share. Analysts expect CVB Financial to earn 79 cents per share in 2008.
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