Tags: regional | bank | stocks | acquisition

CNBC: The Case for Regional Bank Stocks

By    |   Tuesday, 07 October 2014 12:05 PM

While big bank stocks have appreciated this year, regional bank stocks have not, and that makes the latter a good buy now, some banking experts say.

The overall KBW Bank (stock) Index has returned 3.2 percent so far this year, compared with negative 7.2 percent for the KBW Regional Banking Index.

Analysts see several reasons to favor regional banks, according to CNBC. First, the strongest of them will take over the weakest, driving profits and dividends higher.

In 2013, there were 5,876 commercial banks in the U.S., the lowest number since the Great Depression and down from 7,284 in 2007, according to FDIC data.

Second, big banks suffer from heightened regulation in the wake of the financial crisis, making it more difficult for them to make productive acquisitions.

"Big banks are saddled with regulatory baggage. They're still paying huge fines," Nicholas Galluccio, president of Teton Advisors, tells CNBC. "But regional and community banks are the catalyst for mergers and acquisitions, which is going to pick up dramatically in the next few years."

A yawning gap exists between strong and weak small banks, says Matthew Olney, a managing director at Stephens Inc. "There's a big separation between the haves and have nots among smaller banks. And the best banks will rise to the top, since some banks haven't been able to find loan growth."

"Regional banks are making more money," Chris Marinac, director of research at boutique broker/dealer FIG Partners, explains. "They're in the early innings of a profit comeback, as loan credit quality continues to grow."

Others make some of the same arguments.

Large banks "are not necessarily that much cheaper relative to where they've traded at historically," Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods (KBW), tells TheStreet.com.

"I would say that because of the outstanding regulatory issues as well as litigation that right now investors should be looking to the regional banks."

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While big bank stocks have appreciated this year, regional bank stocks have not, and that makes the latter a good buy now, some banking experts say.
regional, bank, stocks, acquisition
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2014-05-07
Tuesday, 07 October 2014 12:05 PM
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