Mortgage Market Halts Regional Banking Recovery
May 25 2011 - 8:16AM
Marketwired
Companies in the regional banking sector have posted better numbers
of late as most firms are finally setting aside less money to cover
loan losses. More thorough and cautious credit checks have led to
fewer delinquent loans and greater financial stability. While the
improving margins helped narrow losses, long-term growth worries
still loom. The Bedford Report examines the outlook for companies
in the Regional Banking Sector and provides research reports on
Regions Financial Corporation (NYSE: RF) and Fifth Third Bancorp
(NASDAQ: FITB). Access to the full company reports can be found at:
www.bedfordreport.com/2011-05-RF
www.bedfordreport.com/2011-05-FITB
Although employment numbers are improving, analysts argue loan
demand remains low due to the average American's weaker appetite
for debt following the financial crisis. It is believed that many
banks will not see much revenue growth because of this, but that
instead declining credit costs will be the primary driver of
profits moving forward.
Several Banks in the industry have warned that the increased
role of government-owned companies in the mortgage market may weigh
on results moving forward. Housing market reform could create
opportunities for companies in the savings and loans industry with
marginal debt issues. Smaller banks may be able to originate more
housing loans as Washington mulls its options regarding government
sponsored enterprises.
The Bedford Report releases regular market updates on the
Regional Banking Industry so investors can stay ahead of the crowd
and make the best investment decisions to maximize their returns.
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In order to offset a poor mortgage market, Regions Financial has
begun to diversify its loan portfolio by lending to defense and
technology companies. Regions Financial posted a surprise first
quarter net income of $17 million, or 1 cent per share, compared
with a loss of $255 million, or 21 cents per share, in the year-ago
quarter. Regions' chief executive, Grayson Hall, believes the bank
is making "solid headwind towards sustainable profitability and key
credit metrics continue to improve."
Fifth Third Bancorp reported first quarter net income available
to common shareholders of $88 million or 10 cents per share. The
results compared favorably with net loss of $72 million or 9 cents
in the prior-year quarter.
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