The seizure of Freddie Mac and Fannie Mae is good news for bank stocks, particularly those with exposure to the housing market, analysts said Monday, upgrading shares of several regional banks.
Friedman, Billings, Ramsey analysts lifted shares of East West Bancorp Inc., Zions Bancorp., UCBH Holdings Inc. and Regions Financial Corp. in client notes Monday.
They said the federal bailout of Fannie and Freddie will have positive effects on bank stocks, particularly those with low valuations stemming from uncertainty over capital levels due to exposure to housing-related losses.
On Sunday, the federal government announced it was placing Freddie and Fannie, which together guarantee or hold trillions of dollars in home loans, into a government conservatorship.
The analysts said the seizure of the mortgage giants should improve financing costs for the average household, meaning better construction sales and thus a stronger chance that the banks will receive the full principal and interest on their loans, wrote analyst James Abbot.
The analysts raised price targets on the stocks as well. Abbot raised his target on East West to $18 from $12, on Zion to $43 from $31 and on UCBH to $8 from $5. Analyst Scott Valentin lifted his target on Regions to $12 from $10.
Shares rose in premarket electronic trading Monday. East West climbed 94 cents, or 6.8 percent, to $14.80. Zions added $3.72, or 11.5 percent, to $35.99. UCBH advanced 88 cents, or 13.8 percent, to $7.25. Regions gained $1.46, or 13.2 percent, to $12.55.
The stocks are down between 29 percent and 55 percent since the start of the year.
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