NEW YORK (TheStreet) -- When I analyze regional banks, I focus on the 24 banks in the PHLX KBW Banking Index (BKX), which may have peaked at $50.69 on March 19. This index includes the four banks considered "too big to fail" -- JP Morgan (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC).
The BKX is up 55.7% since the October 2011 low and is up 24.1% year to date. Looking at the weekly chart for BKX we show that technical momentum (12x3x3 weekly slow Stochastic) reading is declining with BKX above its 200-week simple moving average at $46.00, which is a neutral configuration. My monthly, annual and quarterly value levels are $46.09, $42.98 and $41.10 with a weekly risky level at $51.30.
Fundamentally, 11of the 24 members of the BKX are rated a buy according to ValuEngine with the other 14 rated hold. The buy-rated regional banks are: BB&T Corp (BBT), Citigroup, Capital One (COF), Fifth Third Bank (FITB), Huntington Banc (HBAN), Keycorp (KEY), PNC Financial (PNC), Regions Financial (RF), State Street (STT), US Bancorp (USB) and Wells Fargo (WFC).
Regions Financial recently repaid its $3.5 billion in TARP money received from the federal government. The company used proceeds from the sale of Morgan Keegan to Raymond James (RJF) and a $900 million common stock offering to raise the funds.Wells Fargo recently mailed a notice to companies that have a Small Business Line of Credit Account indicating that the interest rate will rise significantly in this month. This increase may cause some small businesses clients to hold off hiring / expansion plans. With the prime rate at 3.25% the line of credit interest rate goes from 5.75% to 8.25%, as the spread to the funds rate rises from 2.50% to 5.00%. An issue for all 24 big banks is increased assessments to fund the FDIC Deposit Insurance Fund (DIF). Under Dodd-Frank the DIF must be expanded to 1.35% on insured deposits by Sept. 30, 2020. The current reading is an anemic 0.13%. If this rule was in effect today the DIF would have to be at $94.2 billion versus the current $9.2 billion. By Sept. 30, 2020, this amount could be doubled given the 62.6% growth rate of insured deposits over the past four years. Insured deposits are up as a flight to safety of up to $250,000 per bank. These bigger banks are subject to assessments based upon total assets at a higher percentage than the smaller community banks.
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