The Zacks Analyst Blog Highlights: Simon Property Group, PNC Financial Services Group, SunTrust Banks, JPMorgan Chase and Bank of America

Zacks

For Immediate Release

Chicago, IL – August 13, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Simon Property Group, Inc. (SPG-Free Report), The PNC Financial Services Group, Inc.(PNC-Free Report), SunTrust Banks, Inc. (STI-Free Report), JPMorgan Chase & Co. (JPM-Free Report) and Bank of America Corp. (BAC-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Simon Property Upgraded to Buy

On Aug 8, Zacks Investment Research upgraded Simon Property Group, Inc. (SPG-Free Report) to a Zacks Rank #2 (Buy). The upgrade of this retail real estate investment trust (:REIT) came on the back of better-than-expected second-quarter 2013 results.


Why the Upgrade?

Consistent with its winning streak, Simon Property came up with a solid operating performance during the second quarter and easily outpaced funds from operations (:FFO) estimates. Quarterly FFO per share was up 11.6% year over year and beat the Zacks Consensus Estimate by 1.93%, primarily due to an increase in minimum rent, overage rent and occupancy.

In particular, significant portfolio restructuring activity has been steering Simon Property to strengthen its footprint on national and international levels. It has been active in capitalizing on growth opportunities in some of the top global markets, with a focus on enhancing its Premium Outlets portfolio. As part of this strategy to expand in upscale locations across the world, recently Simon Property opened its first Premium Outlet Centre in Toronto, Canada.

Prompted by its strong fundamentals, Simon Property raised its FFO growth outlook for the second time in the year. The upward revision of the guidance also boosts investors’ confidence.

The stronger-than-anticipated results triggered an uptrend in the Zacks Consensus Estimates, as analysts became more constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that rose 0.7% to $8.73 for 2013 and 0.3% to $9.36 per share for 2014 in the past 30 days.

Additionally, the long-term earnings growth forecast for the company is 6.88%. Hence, the favorable estimate revisions, driven by positive second-quarter results and expansion efforts made way for the upgrade in the rank.

Banks Face Mortgage-Related Inquiry

The probe into the operation of banks with regard to their mortgage-related practices before the financial crisis continues. Now, it is the turn of The PNC Financial Services Group, Inc.(PNC-Free Report) and SunTrust Banks, Inc. (STI-Free Report) to face regulatory inquiry.


In their latest quarterly filings with the Securities and Exchange Commission (:SEC), both PNC Financial and SunTrust revealed that they face mortgage-related investigations from various regulators.

PNC Financial disclosed that the Department of Justice (:DOJ) and the Consumer Financial Protection Bureau (:CFPB) are probing into the mortgage pricing practices of the company as well as National City Corporation – acquired by PNC Financial in 2008.  The allegations include discrimination against protected borrowers. Under the federal law, lenders can be prosecuted for practices that discriminate based on race, color and religion, among others.

Additionally, PNC Financial revealed that it has received a subpoena for information related to foreclosures from the U.S. Attorney's Office for the Southern District of New York. The primary information being sought is claims for foreclosure expenses related to the loans insured or guaranteed by Fannie Mae or Freddie Mac.

For SunTrust, the investigation relates to processing of mortgage-modification applications under the Home Affordable Modification Program (HAMP). The Office of the Special Inspector General for the Troubled Asset Relief Program (:SIGTARP) and the U.S. Attorney's Office for the Western District of Virginia are together probing the company’s loan-modification procedures during 2008–2009.

These regulators allege that SunTrust failed to properly process loan modification applications of mortgages owned by Fannie Mae and Freddie Mac. These agencies accuse the company of misleading borrowers with regard to timelines and other features of the HAMP modification procedure.

Notably, these are among several other lawsuits that PNC Financial and SunTrust face related to their conduct preceding the financial crisis. Given this, at the end of second-quarter 2013, both these companies anticipate legal losses of $400 million each, exceeding their existing litigation reserves.

PNC Financial and SunTrust are the latest banks to reveal that their mortgage practices are under investigation by various law enforcement agencies. Last week, JPMorgan Chase & Co. (JPM-Free Report) disclosed that it faces investigation by the DOJ and the SEC over the sale of risky residential mortgage backed securities (RMBS). Notably, the DOJ and the SEC have already filed 2 separate civil lawsuits against Bank of America Corp. (BAC-Free Report) related to the sale of RMBS worth $850 million in 2008.

Following the completion of the investigation, if banks are prosecuted, it will inevitably lead to a further rise in litigation costs and affect the banks’ images as well as financials.

Though the overall impact from such lawsuits is yet to be evaluated, these measures are somewhat reassuring as they are aimed at restraining mortgage-related malpractices. Most importantly, such measures will likely impart the much needed transparency to banking procedures concerning the sale of mortgages.

Currently, PNC Financial carries a Zacks Rank #2 (Buy), while SunTrust carries a Zacks Rank #3 (Hold)

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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