Jefferies & Co. upgraded its investment rating on Metris Cos. (MXT) to buy from hold.
Analyst Richard Shane says he believes the worst news is behind Metris for the rest of 2003. He thinks master trust credit trends will improve following an unexpected spike in losses in June. Shane says this should drive credit spreads towards more sustainable levels, facilitate crucial funding arrangements. He thinks Metris will be able to resolve its Sept. 30 liquidity needs (the Office of the Comptroller of the Currency has requested, and the company's subsidiary bank has agreed to eliminate federally- insured deposits at the bank, or the risk thereof to the FDIC, by that date) without significant difficulty.
Though the company remains a high-risk name, Shane believes near-term catalysts such as improving spreads and a successful unwinding of the company's bank subsidiary could provide 35%-55% price appreciation.