Updated with market close information and revised year-to-date returns.
NEW YORK (TheStreet) -- Jefferies analyst Ken Usdin on Thursday highlighted four regional bank holding companies "better positioned to show growth" in core earnings, with industry consolidation playing a role.
Usdin expects "large/mid-cap regionals to post decent pre-provision income (PPNR) growth, aided by declining credit-related costs."
Pre-provision revenue is a very useful tool to help analysts and investors understand what's really going on with a bank since at this point in the economic recovery, most of the large industry players are appropriately releasing loan loss reserves which has the effect of distorting bottom-line results.With banks continuing to face pressure on their net interest margins in the prolonged low-rate environment, Usdin expects, on average, "low single-digit net interest income growth" this year, and says that major regional players "capable of growing [net interest income] at faster rates" include KeyCorp (because of CD repricing and loan growth), PNC Financial Services Group (PNC) (from its coming acquisition of RBC Bank (USA), and M&T Bank (MTB), on the "deployment of excess liquidity." The analyst expects fee income for the regionals as a group to be flat during 2012, from the effect on debit card interchange fees from the Durbin Amendment and "tough comps for mortgage banking." Usdin expects BB&T (BBT), Comerica (CMA) and PNC to show "better growth due to recent acquisitions," while Fifth Third Bancorp (FITB) and U.S. Bancorp (USB) "could have a tougher time if mortgage origination volumes decline in line with our expectations. For the group's cost management, Usdin sees SunTrust (STI), Fifth Third and M&T "doing a better job of managing the core," while Huntington Bancshares (HBAN) "could continue to lag a bit." On "environmental costs," including mortgage putbacks, the analyst says credit expenses "continue to be a significant challenge," notably for SunTrust and BB&T. Here's a quick look at the three buy-rated regionals best-positioned for 2012 pre-provision earnings growth, according to Usdin, followed by five more with neutral ratings that face "a tougher time:"
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV