This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Regionals Must Deliver Better Balance Sheets

Stocks in this article: BBT KEY FITB STI USB RF

NEW YORK ( TheStreet) -- The regional banks have surged along with the rest of the financial sector so far in 2010, and now it's time to see if the results can keep up with the stocks.

The view that credit costs reached an inflection point in the first quarter fed the recent rally in the sector, along with an anticipated mitigation of losses and increasing confidence about the overall recovery in the U.S. economy, but the run-up has made the individual stocks that much more vulnerable to any disappointments in the numbers. With the KBW Bank Index (BKX), which includes twenty of the largest U.S. regional banks in addition to the big four money-center banks, up almost 30% through Thursday vs. a gain of around 6% for the S&P 500 index, the pressure is on. The smaller regionals have outperformed as well with the KBW Regional Banking index (KRX), featuring another 50 companies, up some 23% over the same period.

Specifically, investors will be looking at the level of loan loss reserve additions needed, which has crimped earnings power over the last two years. Minimal loan-loss provisioning will be the biggest potential lever in terms of sequential earnings improvement, analysts say. Wall Street will also want to see improvements in delinquency levels and declines in growth of nonperforming assets.

Banks' so-called normalized earnings, essentially profit trends before factoring in loan loss provisions and taxes, will also start coming into focus. Wall Street wants to get some clarity on when banks will be getting back to the core business of being banks, i.e. making loans and taking in deposits.

This will be more easily identified in the regional banks since they are not as diversified as the large money-center names -- JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) -- which have multitude of capital markets businesses that contribute to the bottom line.

Large regional banks including BB&T (BBT - Get Report), Fifth Third Bancorp (FITB - Get Report), KeyCorp (KEY - Get Report), Regions Financial (RF - Get Report), SunTrust Banks (STI - Get Report), U.S. Bancorp (USB - Get Report), as well as many smaller names, will begin unveiling their first-quarter numbers the week of April 19, so the verdict will be in shortly and select names could start to break away from the herd.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs