UnionBanCal shares fall, even as Lehman upgrades stock
NEW YORK—Shares fell after initially rising after Lehman Brothers upgraded its rating on UnionBanCal Corp., saying the regional bank has been able to prepare itself for the tough credit environment.
UnionBanCal shares fell 26 cents to $53.56, after earlier rising as high as $56. In the past year, the stock has ranged from $39.32 to $63.10.
Analyst Andrea Jao bumped the stock rating to 'Overweight' from 'Equal weight.'
"We believe that it is noteworthy how management has been able to prepare the company for the currently tough credit environment, while continuing to lend and grow its book of business," she wrote in a note to investors.
On April 23, the bank reported lower earnings after it put aside more money to cover bad home loans. Many banks have been increasing their provision for loan losses and writing down the value of mortgage-related securities on their books.
Jao said the higher provision at UnionBanCal indicates the bank has been quicker to realize that the credit environment is weak. She also said it can "comfortably afford higher credit costs."
UnionBanCal also said it would sell its insurance brokerage business.
"Over the past few years, the company has been very disciplined in reallocating capital away from businesses in which it cannot achieve scale and compete efficiently into its core competencies," she wrote.
