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Regional Banks to Write Home About

Stocks in this article: KRE IAT PJB

Written by Kevin Grewal, Editorial Director at

NEW YORK ( TheStreet) --As regional banks unleashed first-quarter earnings, improved performance in the equity and credit markets helped them top expectations.

The world's largest trust bank, The Bank of New York Mellon (BK), exceeded expectations by boasted a profit of $601 million, or 49 cents per share. The primary driver behind this boost in profits came from a rise in assets under custody and fee revenue, two factors indicative of an improving economy and boost in investor confidence.

BNY Mellon's total assets under custody and administration rose to $22.4 trillion, a 15% increase from a year earlier and were attributable to higher-market values and increased business. As for fee revenue, the bank indicated a 13% increase year-over-year, to $696 million for the quarter. BK has gained nearly 17% over the last year and closed at $32.42 on Thursday.

Winston Salem-based BB&T Corp. (BBT) beat Wall Street's expectations by reporting earnings of 27 cents per share, as net interest income and average deposits rose. On the downside, overall income for the regional bank dropped 39% over the past year as it wrote off more bad loans than initially anticipated and saw an increase in net charge offs of 26%.

As for the future, the bank suggests that credit problems are easing and reduced provisions for credit losses by 15% from a year earlier, which could lead to higher profitability in the coming quarters. BBT is up nearly 61% from a year earlier and closed at $34.34 on Thursday.

Another regional bank to reap the benefits of higher revenues from its fee-based business and a slowdown in consumer loan losses was US Bancorp (USB). The Minneapolis-based bank reported nearly a 27% increase in profits and was in line with analyst expectations, releasing earnings of 34 cents per share.

Additionally, the bank has stated that it is generating enough capital to raise its dividend payout, but will refrain from doing so until a sustainable economic recovery is in place. In regards to loan losses, US Bancorp expects losses to remain relatively stable in the next quarter and has set aside $1.3 billion for further losses. USB has gained 46% over the last year to close at $27.37 on Thursday.

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