Analyst cuts estimates, price targets for banks

A Robert W. Baird & Co. analyst reduced his price target Monday on some regional and national banks because of further losses tied to loan defaults as banks begin reporting second-quarter results.

Analyst David George wrote in a research note, "credit trends will continue to show deterioration, particularly in residential construction, credit card and home equity."

Baird cut price targets and earnings estimates for multiple banks because of continued weakening in the credit markets.

Credit deterioration, which began to accelerate in the middle of 2007, will likely get worse in the second quarter with charge-offs and non-performing loans rising, George wrote in the note.

Charge-offs are loans written off as not being repaid.

George said he expects charge-offs to total about 1.02 percent of total loans in 2008 and 0.98 percent in 2009. Charge-offs totaled about 0.45 percent in 2007.

Banks will see some improvement though during the quarter from spread income growth and stable interest margins _ the profit margin on lending.

Regional banks with capital to lend could also get a boost during the quarter from commercial lending, George wrote in the note. With capital markets still at a standstill, regional banks have been able to boost their commercial lending operations, George said.

George cut his second-quarter earnings estimate for Bank of America Corp. in half to 22 cents per share. He also cut his price target to $32 from $38.

Shares of Charlotte, N.C.-based Bank of America fell 32 cents to $24.27 in late morning trading as the financial services sector continued to be stung by credit market worries.

Earlier in the session, shares of Bank of America reached a seven-year low of $24.17.

Comerica Inc.'s price target was cut to $34 from $36 by George, who also reduced his full-year earnings estimate for the Dallas-based bank to $2 per share from $2.70 per share.

Shares of Comerica touched a 12-year low of $25.73 earlier Monday.

George cut his price target on Wachovia Corp. to $20 from $30, and his second-quarter earnings estimate to 12 cents per share from 69 cents per share.

Shares of Charlotte, N.C.-based Wachovia tumbled $1.25, or 7.7 percent, to $14.97.

Wachovia shares fell as low as $14.70, a 16-year low, earlier in the session.