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Bank OZK Shares Drop 8% on Citi’s Double Downgrade
May 29, 2024 12:04 PM - Davit Kirakosyan
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Bank OZK (NASDAQ:OZK) share fell more than 8% pre-market today after Citi analysts downgraded the company from Buy to Sell and lowered the price target from $57 to $37.
The analysts cited significant concerns about Bank OZK's largest individual loan, totaling $915 million, which includes a $135 million loan for the multi-use project "Echo Street West" in Atlanta, as well as general life science construction lending. These two loans represent 3.8% of the bank's non-purchased loans and are 8.1 times larger than the total allowance for credit losses (ACL) for construction loans.
Despite Bank OZK's strong track record in high-value commercial real estate projects with minimal losses, these newfound credit risks, combined with tightening capital levels, have led Citi to revise the valuation. The analysts weighed the bank's healthy pre-provision net revenue (PPNR) outlook against these credit concerns and determined that a share price of $37.00 is more appropriate, resulting in the downgrade to Sell.
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