UPDATE 1-RESEARCH ALERT-JP Morgan downgrades Ambac Financial
(Recasts; adds details)
Aug 8 (Reuters) - J.P. Morgan Securities downgraded Ambac Financial Group (ABK.N) to "underweight" from "Neutral" on valuation, to reflect a relatively bleak outlook and negative tangible equity for the bond insurer.
"In our view, Ambac is a company with a broken business model saddled with substantial liabilities and negative tangible equity," analyst Andrew Wessel wrote in a note to clients.
Wessel also said revenue potential for Ambac's Connie Lee subsidiary was limited, adding it would take at least a decade before the subsidiary could earn even a low double-digit return on equity (ROE).
"We find the earnings potential of the model unappealing as insurance is being used less frequently and the ratings agencies are preparing to increase credit ratings across the municipal complex," he added
Shares of Ambac Financial closed at $4.59 Thursday on the New York Stock Exchange. (Reporting by Mary Meyase in Bangalore; Editing by Bernard Orr) ((mary.meyase@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: mary.meyase.reuters.com@reuters.net))
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