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Morgan Stanley, Some Regional Banks Could Soar in 2013

The regional bank sector has done well and is poised to do even better in 2013. Below is a five-year chart of the iShares Dow Jones US Regional Banks ETF (IAT). It's been a long road back from the 2009 lows. IAT Chart IAT data by YCharts

Notice the huge spike in volume at the end of 2012. The combined anticipation of the Federal Reserve's endless Quantitative Easing and the hope for a better year ahead started the ball rolling uphill. Two of the top 10 holdings in the IAT ETF are very promising, and insider buying helps verify this.

BB&T (BBT - Get Report), which operates as a financial holding company for Branch Banking and Trust Company in Winston-Salem, N.C., makes up 7.2% of the holdings of IAT.

BBT will report earnings Thursday, and the expectations by analysts are realistic if not conservative. EPS is expected to be higher by an average estimate of 27% although quarterly revenue growth may only rise by less than 2%. BBT pays an 80 cent annual dividend.

Another holding of IAT is one of Jim Cramer's favorite regional banks (and mine, too), Keycorp (KEY - Get Report), which hit a 52-week high on Wednesday on heavy volume closing at $9.15. It is scheduled to report its fourth-quarter 2012 earnings on Jan. 24.

KEY's CEO and CFO hold a combined 787,905 shares of the Cleveland, Ohio-based company's shares. Analysts estimate just a slight improvement in KEY's fourth-quarter EPS compared to the year-ago quarter, but they also estimate nearly an 8% increase in quarterly revenue. KEY may even be a takeover target!

Keep a close watch on the big investment banks Morgan Stanley and Goldman Sachs. At the same time, consider the regional banks including BBT and KEY, which should also offer plenty of bang for the buck if purchased on dips and pullbacks.

This year may end up being "The Year of the Bank Stocks!"

At the time of publication the author had a position in KEY.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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IAT $36.52 0.33%
BBT $38.49 -0.72%
KEY $13.14 0.38%
MS $33.59 -0.15%
AAPL $118.88 0.96%


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