(Adds details, analyst's comments, background)
Nov 27 (Reuters) - Punk Ziegel analyst Richard Bove upgraded five stocks in the financial services industry, including PNC Financial Services Group Inc (PNC.N) and BB&T Corp (BBT.N), based primarily on valuation assumptions.
Bove said both PNC Financial and BB&T have avoided most of the pitfalls in the banking industry. PNC's earnings outlook was better than most others in the sector, he added.
BB&T's stock is falling in line with its industry and as the financial crisis unwinds the bank should benefit from reintermediation of loans to the banking industry, Bove said in a note to clients.
Bove upgraded Regions Financial Corp (RF.N) saying despite several issues like falling margins and a lowering of the earnings estimate, its earnings will rise in 2008 and 2009. "The stock has overshot the negatives on the down side. It is simply too cheap to pass up," Bove said.
On Washington Mutual Inc (WM.N), Bove said he would not buy the stock but no longer wanted to sell it either.
Bove believes Keycorp (KEY.N) is another stock that has overshot the downside, and that the company's earnings in 2008 may only be slightly ahead but they will be "meaningfully" higher in 2009.
The following table shows the stocks that were upgraded: Company Rating
Old New PNC Financial Market Perform Buy BB&T Corp Market Perform Buy Regions Financial Market Perform Buy Washington Mutual Sell Market Perform KeyCorp Sell Market Perform
Regional banks have been suffering along with larger rivals from the subprime mortgage market crisis with the KBW Bank Index .BKX, which includes the above banks, closing down about 5 percent at $88.12 Monday after touching a year low of $88.02. (Reporting by Nivedita Gupta in Bangalore; Editing by Jarshad Kakkrakandy)