Stealth RallyIndeed, in a year when the average bank stock as measured by the Philadelphia KFB Bank Index is down 8%, many regional banks actually are trading higher. Some of the sector's standout performers: New Jersey's Commerce Bancorp ( CBH), up 21%; Melville, N.Y.-based North Fork Bancorp ( NFB), up 31%; and Alabama's AmSouth Bancorp ( ASO), up 20%. Like all lenders, regional banks are benefiting from a low-interest rate environment that has spurred consumer borrowing for auto loans, mortgages and home-equity lines of credit. But unlike commercial banks, the regional banks have avoided taking hefty writedowns on their business loan portfolios, since most weren't big lenders to the troubled telecom, technology and energy sectors.
|Regional Players |
|Bank||YTD % Gain||2002 PE||2003 PE||Dividend Yield|
|AmSouth Bancorp (ASO)||20||17||12.5||3.9%|
|Commerce Bancorp (CBH)||21||23||20||1.3|
|Fifth Third Bancorp (FITB)||8.5||24||21||1.4|
|North Fork Bancorp (NFB)||31||16||15||2.4|
|Source: Thomson Financial First Call|
The bulk of commercial lending by regional banks is to real estate developers and homebuilders, the one sector of the economy that has shown surprising strength throughout the recession. And unlike a diversified financial institution like J.P. Morgan, most regionals don't rely on investment banking work to generate a big chunk of their revenues. Even better, the fact that the regional banks don't get involved in investment banking means they've managed to stay clear of the conflict-of-interest scandals that are dogging most Wall Street firms. "It's still a favorable environment for regional banks," says Gary Townsend, a regional bank analyst with Friedman Billings Ramsey, who doesn't own shares in the banks he covers.