3 Cheap Regional Banks Posting Solid Earnings

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We are starting to see earnings from regional banks across the U.S., and many of them are reporting solid numbers.

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There are pockets of weakness, and mortgage lending continues to be a rough spot for many of them as a weaker-than-expected housing market and intense competition continue to make mortgage lending a tough business.

However, we’re seeing some signs that business lending is picking up, which is helping many of the regionals.

Net interest margins remain problematic in a low-rate world but cost cuts, credit improvement and buybacks are bolstering the bottom line. Many regional banks are still reasonably priced, and if we ever do see an actual market pullback they will be incredible bargains.

Here’s a look at reasonably priced regional banks that are posting good earnings results.

Regional Banks: KeyCorp (NYSE:KEY)

key corp 185KeyCorp (NYSE:KEY) is a leading regional bank with 995 branches in the Midwest part of the country. The bank had an okay quarter with earnings of 26 cents per share compared to 28 cents in the year-ago period.

Both loan and deposits were up year-over-year as average loans climbed 5.1%, driven by a 11.5% growth in commercial, financial and agricultural loans. Average deposits were up 4.9%, due to growth in non-interest-bearing deposits. Nonperforming assets were just 0.79% of total asset so the loan portfolio remains healthy.

CEO Beth Mooney commented on earnings, telling investors, “Our first-quarter results were solid and reflect our continued focus on growing our businesses. Revenue was up from the prior year and expenses were well-managed as we generated positive operating leverage.”Key Bancorp repurchased $208 million worth of common shares during the first quarter of 2015 and its capital plans include an additional $725 million of share buybacks. Management is obviously taking a very shareholder-friendly approach.

Regional Banks: Firth Third Bancorp (NASDAQ:FITB)

fifth-third-stock-fitb-185Firth Third Bancorp (NASDAQ:FITB) is also based in the Midwest and has 1,302 branches in the Midwest and southeastern portion of the United States.

Fifth Third had a solid quarter with earnings of 44 cents per diluted share in the first quarter of 2015, up from 36 cents year-over-year. Average loans increased 2% compared with the year-ago quarter with continued strength in C&I lending and growth in commercial real estate. Credit conditions continued to improve as nonperforming assets fell by 11% year-over-year to just 0.57% of total assets.

Fifth Third has been active in buying back stock, repurchasing 8.97 million shares in the past two quarters. The capital plan for 2015 includes a dividend increase and a total buyback of $765 million.

CEO Kevin Kabat was pleased with the results, telling investors, “Our results this quarter were solid despite the impact of expected first quarter seasonality and challenging market conditions, and reflect the strength of our franchise in generating strong shareholder returns resulting from our strategic decisions to build and invest in our businesses.”

Regional Banks: Republic Bancorp, Inc. KY (NASDAQ:RBCAA)

republic-bank-rbcaa-185Republic Bancorp, Inc. KY (NASDAQ:RBCAA) remains one of my favorite regional banks.

Republic has 42 branches and about $4 billion in assets. The bank had a strong first quarter with earnings of 66 cents per share compared to 58 cents per share in the first quarter of 2014.

Republic had strong loan growth in the quarter, and credit quality continues to improve. Nonperforming assets declined from 1.17% of total assets in 2014 to just 0.8% this year. In addition to strong performance at the core bank, Republic Processing Groups Tax Refund Solutions saw a healthy 9% increase in net income.

CEO Steve Trasker was happy with the results. In the earnings release he said, “While maintaining this momentum at the pace we have achieved thus far will not be easy for the rest of the year, our loan pipelines remain at solid levels, and business prospects are strong, giving me great optimism for the remainder of 2015.”

As of this writing, Tim Melvin was long RBCAA.

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