Fitch Ratings reiterated its long-term Issuer Defaults Rating
(IDR) at 'BBB+' for
Hancock Holding Company
) and its main financial divisions. Concurrently, the rating agency
also reiterated the short-term IDR at 'F2.' The outlook of the
ratings remains stable.
Affirmations came at the back of Hancock's traditional operating
policy, which has helped the company retain its profitability even
during the financial crisis. Over the past five years, Hancock's
mean return on assets (ROA) was impressive at 0.89%. Even though,
Hancock's second quarter 2012 ROA was 0.83% and efficiency ratio
stood at 69.73%, Fitch anticipates both to recover based on expense
management in the long-term.
Fitch noted that the Whitney acquisition has resulted in a more
spread-out loan portfolio, greater growth prospects as well as the
facility to cross-sell more products. Along with the gradual
integration of the Whitney acquisition, Hancock is expected to
continue its expense management.
Also the rating agency expects it to trim down its branches,
resulting in reduced personnel and real estate expenses. Going
ahead, Fitch can upgrade the ratings based on a rise in expected
earnings, attributable to substantial loan-growth and cross
Furthermore, continuously better operating results and superior
capital ratios on a year-over-year basis were the other positives.
The capital ratios declined after the closure of the Whitney
Holding Corporation acquisition, which took place on June 4, 2011.
Fitch anticipates the capital ratios to improve in the near to
Hancock's tangible common equity ratio stood at 8.72% as of June
30, 2012 compared with 8.09% as of June 30, 2011. Total risk-based
capital ratio was 14.00% as of June 30, 2012 compared with12.80% as
of June 30, 2011.
However, Fitch is of the opinion that the advantage of the rating
outlook would diminish if the company seeks to perk up
profitability over a longer term.
On the other hand, another acquisition of the same proportion as
the Whitney deal, during a period when Hancock is reshuffling its
own operations, can result in lower ratings. Ratings are primarily
expected to be impacted by any deal which might result in a decline
in capital ratios.
Ratings might suffer a mid to long-term dip if the company plans to
improve growth further. As the lending markets are highly cluttered
with competition, the company might considerably make price or
terms and conditions more flexible to gain new businesses.
This move might impact both profitability and credit costs on a
long-term basis, which is anticipated to be detrimental to the
Hancock Holding Company currently retains a Zacks #4 Rank, which
translates into a short-term Sell rating. In the U.S. market, the
company's peers include
Monarch Financial Holdings, Inc.
Eastern Virginia Bankshares Inc.
EASTERN VA BKSH (EVBS): Free Stock Analysis
HANCOCK HLDG CO (HBHC): Free Stock Analysis
MONARCH FINANCL (MNRK): Free Stock Analysis
To read this article on Zacks.com click here.