PennyMac Financial initiated with neutral view at UBS, here’s why

UBS analyst Doug Harter initiated coverage of PennyMac Financial with a Neutral rating and $85 price target. The analyst initiated or assumed coverage of six mortgage banks. While down from their peak, the elevated level of mortgage rates should continue to weigh on near-term origination activity and the intermediate term outlook remains challenging as well, the analyst tells investors in a research note. The firm says the mortgage banks with a larger focus on servicing should continue to benefit from the slow prepayment environment and produce higher, more stable returns on equity.