With government regulators, investors and shareholders gnashing their teeth over the state of the U.S.’s biggest banks, it’s time for investors to look beyond New York City’s Citigroup (NYSE:C) and JPMorgan (NYSE:JPM), San Francisco’s Wells Fargo (NYSE:WFC) and Charlotte’s Bank of America (NYSE:BAC) toward smaller venues and institutions.
You know the litany when it comes to the big boys: continued concerns over “Too Big to Fail” or “To Big to Be Governed” behavior that results in massive lawsuits; “clawbacks” over multibillion-dollar losses; stress-test measurements that some, but not all, can pass; and a more limited appetite for lending.
In response, some smaller players are starting to take great advantage of those problems, marketing themselves as regional and in some cases local champions of consumers and small businesses. Lending is up for most of these players, as are deposits and, well, confidence.
On the investment side of the ledger, according to a report on MarketWatch, “regional bank stocks have outperformed the ‘big banks’ in recent months as they have been less affected by the current euro crisis and stricter regulatory environment. The SPDR KBW Bank ETF (NYSE:KBE) has fallen over nearly 6 percent over the last three months while the SPDR KBW Regional Banking ETF (NYSE:KRE) has seen a 1.3 percent fall over the same period.”
Take a lesson from the data and get to know some superregionals (yes, they’re the biggest of the small fry) that are not only outperforming the money-center majors, but are making mincemeat out of the S&P 500’s 6.20% year-to-date return as well.
I’ve screened 10 of the largest regionals, and come up with four solid keepers as you jettison the “Too Big to Be Bothered” crowd and look for better places to put that money.
BB&T (NYSE:BBT) stands for Branch Banking & Trust Co., and that Winston-Salem, N.C., company operates approximately 1,800 financial centers in 12 states and Washington, D.C. It offers a full range of consumer and commercial banking, securities brokerage, asset management, mortgage, and insurance products and services.
What’s even nicer is that BB&T is consistently recognized for outstanding client satisfaction by the U.S. Small Business Administration. Imagine that! A nice place to bank.
With $174.8 billion in assets and a market capitalization of $21.9 billion, BBT has earnings, deposits and loan growth that are all on the rise — and have been for the last three years running. The bank’s diverse sources of revenue include about half coming from community banking with another 15% from insurance services.
The stock has climbed nearly 25% year-to-date, and it carries a 2.6% dividend yield.
U.S. Bancorp (NYSE:USB) is a Minneapolis, Minn.-based institution with $341 billion in assets, which actually makes it the country’s fifth-largest bank, although you wouldn’t know that by its low-profile approach.
USB operates 3,080 banking offices and 5,061 ATMs in 25 states, offering banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions.
Like many of its regional brethren, USB also garners citizenship awards, like the 2011 Spirit of America Award, the highest honor bestowed on a company by United Way.
USB generated $17 billion in revenue and pumped out $10 billion in profit last year, with an outstanding 14% return on equity, to boot. Quarterly year-over-year growth of 28% portends continued strength in the market, and with a 20% year-to-date increase in the stock price and a steady 2.43% dividend yield, USB is a solid player.
Comerica (NYSE:CMA) is a Dallas-based financial services business that operates in Arizona, California, Florida and Michigan, as well as in Canada and Mexico. With a market cap of just under $6 billion, assets of $61 billion and deposits of just under $48 billion, Comerica is more of a middle-of-the-pack regional — but it carries a big wallop.
Comerica had a bit of a down year in 2009 but has recovered nicely, increasing earnings per share and dividends in every year since. At the same time, it has lowered its loan-loss provisions to reflect stronger operational efficiencies.
Investors have taken notice, with the stock up 18% year-to-date, and the dividend yield is at 2%.
Atlanta based SunTrust (NYSE:STI) has 1,651 retail branches and 2,914 ATMs located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, West Virginia and the District of Columbia. With total assets of $178.2 billion, it has the size and scope to offer financial products across the board.
While SunTrust’s region includes areas where foreclosure and delinquency rates are high, like Florida and Georgia, analysts focus on the idea that refinancing opportunities provide upside potential.
SunTrust got a nice boost earlier this month when Goldman Sachs (NYSE:GS) raised the stock to an outperform rating for the second quarter, according to The Street. SunTrust’s $7 billion in revenue turned into $700 million in earnings, and first-quarter earnings growth ran at nearly 39% year-over-year.
SunTrust will need to improve on a fairly weak 0.42% return on assets. The dividend could use a jump-start, too, as the yield now stands under 1%.
Investors are overlooking the negatives however, as the stock has returned nearly 40% year-to-date. This one might need a little more time, but appears worth the effort.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he did not hold a position in any of the aforementioned securities.