BancorpSouth's Bad Month
Poor BancorpSouth (Stock Quote: BXS). The future looked so promising for the bank at the start of July, and then things just went, well, south.
Shares of the regional lender fell over 17% a week ago after the company reported a second-quarter loss of $12.6 million, or 15 cents a share, primarily due to a 28% spike in nonperforming assets. The average estimate of analysts polled by Thomson Reuters was for a profit of 23 cents a share.
Moreover, judging from the earnings report, the bank will likely be dogged by bad loans for a long time. BancorpSouth recorded a $62.4 million provision for credit losses in the latest quarter, along with an $8.2 million writedown of its mortgage servicing rights.
What a shame -- and neck-breaking turnaround -- from where the company was positioned three weeks ago.
On July 2, Bank of America initiated coverage of BancorpSouth, then trading above $17 a share, with a buy rating and a $22 price target. Said BofA's analyst at the time, "The recent market pullback and late-developing credit issues have presented an opportunity to buy what we regard as a high-quality institution at a valuation last reached at the depth of the financial crisis."
Fast forward to Monday, and the same analyst is singing a wildly different tune, with the stock struggling to stay above $14.
"We are lowering our rating on BancorpSouth to Neutral from Buy, as increasing nonperforming assets indicate credit losses are likely to continue to weigh on earnings and capital for the next several quarters," wrote the analyst.
Wait a second! If Bank of America loved the stock at $17, shouldn't they love it even more at the cheaper price of $14?
Maybe next month. Dumb-o-meter score: 80 -- BofA's bank analyst was not the only one doing an incomprehensible about-face in July. Hedge fund guru Barton Biggs went from grizzly bear to raging bull in the same three-week period.