Ahead Of The Bell: National, Regional Banks

NEW YORK (AP) — Research firm Collins Stewart initiated coverage of the banking sector Wednesday, saying that continued uncertainty surrounding credit risk would keep stock prices at regional and national banks from rising too much in the coming quarters.

The analysts placed a "Market Weight" on the sector and individually rated 18 regional and national banks.

In a research note, Collins Stewart said a recovery in the banking sector is likely to be "slow and long." Credit losses will peak in the middle of 2010 with charges tied to loan defaults remaining elevated into 2011.

Nearly all banks have faced mounting loan losses during the recession as more customers fall behind on payments and unemployment continues to move higher.

"While we see some early signs of stabilization in the economy, we find it difficult to get too excited on the sector given the continued credit uncertainty and the prospect of a long and slow economic recovery," the firm wrote in the research note.

Banks will have to continue holding onto cash and limit lending and spending because of uncertainty surrounding credit losses. That will further slow any recovery in the sector, Collins Stewart wrote in the note.