By Greg Morcroft
NEW YORK (Dow Jones) - Huntington Bancshares stock fell 13% on
Monday after Citigroup analysts downgraded the Ohio-based regional
bank and said its research shows its capital levels are potentially
more troubling than most rivals.
Citi analysts downgraded shares of Regions Financial (RF), Zions
Bancorp (ZION) and Marshall & Illsley (MI@) to hold for the
same reasons.
Those three shares all fell, but not as sharply as Huntington
did.
Citi analysts said the preformed their own "stress test" on a
number of regional banks, and used criteria they believe that the
government will use in it own well publicized tests of banks with
at least $100 billion in assets.
"Given our belief that the stress-test announced by the US
Treasury that will be performed on banks exceeding $100 bln will
ultimately be applied more widespread, we performed a stress-test
on our regional bank coverage to help formulate a view of how the
banks are positioned for this from a capital standpoint," the
analysts said in an extensive 78-page report delivered to clients
on Monday.
The research determined that Synovus (SNV), TCF Financial and
New York Community Bancorp (NYB) are best positioned among the
regional banks to perform well on a stress test.
Those shares all rose Monday.
To run their test, Citi analysts said the evaluated several data
sets, including their regulatory issues, geographic locations,
loan-to-value-ratios on the mortgage loans the banks have made and
cumulative defaults to date, to estimate a worst-case scenario for
total losses during the current downturn.
The analysts said, "it is important to note that the stress test
we performed is severe in that it assumes all future losses are
recognized in 2009, which we believe is a lower probability
scenario, and would require substantial deterioration from current
economic conditions which are already severely stressed."