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Commercial Capital Bancor (CCBI) Message Board

  • bankstockexpert bankstockexpert Sep 19, 2003 10:07 AM Flag

    downgrade from Sandler O'neill

    According to Dow Jones Newswire headline, Sandler O'neill cut commercial capital from Buy to Hold. No reason is given in the headline.

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    • They claimed it was due to valuation. I have a $2.00 earnings number for 2004 which puts the stock around 11.7x. That is far from expensive. Remember, Sandler and all the other sell side firms are in the business of generating commissions and this was another bad attempt to do just that. Longer term people will be wishing they bought it at this price.

      • 1 Reply to hcc94
      • A downgrade based on price? And from the lead manager of the IPO, nonetheless. Yes, the stock is looking a bit pricey as it approaches 4x book value.

        Perhaps the outlook for profitable growth may have also been clouded by the bounce in interest rates? According to the firm's s-1 filing, greater than 60% of their pre-IPO loan origination volume was coming from refinancings. Could it be possible that the phones are not nearly as busy as they were earlier this year?

        Yet in their most recent 10Q, the company states that "It is our belief that our loan origination volumes are driven by the continued maturation of our franchise and less a result of the interest rate environment..."

        Yes, CCBI is a strong player in its niche, and yes, they will be able to maintain ownership of a greater percentage of their loan originations due to realignment of lending operatons. But, bottom line, a rising rate trend will likely hamper the growth of all originators over time, even strong operators like CCBI.

        And what if rates continue to rise, as CCBI's lead banker has suggested? Might future earnings estimates be at risk? No one knows for certain, but with seasoned pros expecting higher rates, and with the stock up nearly 200% since its IPO, there are heightened risks to be considered here.

 

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