Operation Twist to Spur Loan Growth at Regions Financial and Fifth Third Bancorp
September 23 2011 - 8:16AM
Marketwired
Regional banking stocks were hammered earlier this week after the
Federal Reserve announced it will push long term interest rates
lower. On the upside, "Operation Twist" is designed to spur loan
growth -- something regional banks have struggled to regain in the
aftermath of the recession. The Bedford Report examines the outlook
for companies in the Regional Banking sector and provides equity
research 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/RF www.bedfordreport.com/FITB
In its statement, the Fed noted that the economy is growing
slowly, unemployment is high and housing remains in a prolonged
slump. The central bank said in a statement that operation twist
was aimed at reducing the cost of borrowing for businesses and
consumers, including the cost of mortgage loans. It hopes that the
lower rates will encourage companies to build new factories and
hire more workers, and consumers to start spending again on homes
and cars and clothes and vacations.
In recent quarters, regional banks have begun to post improved
credit quality. More thorough and cautious credit checks have led
to fewer delinquent loans and greater financial stability. As such,
Banks are setting aside less money to cover bad loans, and some are
seeing loan losses recede. While credit quality improved, the high
unemployment rate has been damaging to banks' long term loan
growth.
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Hinting that the troubled Regions Financial may have bottomed
out, S&P recently lifted its outlook on the bank, as the
ratings agency said it is impressed by Regions' improved loan
performance. For the second quarter Regions Financial said
loan-loss provisions were reduced to $398 million from $651 million
a year earlier.
Fifth Third Bancorp recently boosted its return to shareholders.
The company raised its third-quarter dividend 33 percent to 8 cents
per share from the previous quarter's 6 cents, the second increase
this year after the regional bank repaid a taxpayer bailout
extended during the financial crisis.
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