Bank OZK selloff on downgrade likely overshot risk, says UBS

UBS analyst Erika Najarian says shares of Bank OZK fell 15% yesterday after a Citi double downgrade. After speaking with the bank’s CEO George Gleason, the analyst believes the price action yesterday likely overshot the actual risk to earnings by 2.5 times. OZK’s $915M construction loan in San Diego for a life sciences facility is not fully drawn as only $550M has been taken, the analyst tells investors in a research note. The firm points out the sponsor has $900M-$1B in equity tied up in the deal, making “turning the keys over” a far more difficult choice for the borrower. Gleason appeared confident that the building will be stabilized enough to allow the borrower to obtain permanent financing by the time the loan is due in August 2026, adds UBS. The firm keeps a Neutral rating on OZK with a $49 price target.