Shares of Webster Financial Corp. rose Wednesday after an analyst at Jefferies & Co. said he expects the regional bank to release some of its reserves as its borrowers make more progress in paying loans on time, The Associated Press reports.
Jefferies analyst Casey Haire raised the rating on the Waterbury-based bank to “Buy” from “Hold” and raised the price target on the stock to $23 from $19.
Haire also bumped up earnings projections, and now expects the bank to show a profit of $1.15 per share for 2011, versus a prior estimate of $1.10 per share.
Analysts surveyed by Thomson Reuters, on average, expect Webster to post profit of 98 cents per share for 2011, with estimates ranging from 75 cents to $1.25 per share.
Banks have been weighed down for several years by the need to set aside reserves to cover losses related to bad mortgages and other loans. Webster carries above average reserves, Haire said, despite consistent improvements in the performance of its outstanding loans.
Haire said improving credit quality and the fact that Webster in December paid back government loans from the Troubled Asset Relief Program makes it likely Webster will release some of the loan loss reserve. The analyst is expecting the bank to see profit margins shrink a bit but said credit-related expenses will ease as non-performing loans are worked down.
Webster Financial added $1, or 5.1 percent, to $20.53 in Wednesday afternoon trading. The stock has traded between $12.17 and $22.68 in the past year.
