Nobody was really expecting much from bank stocks in the way of earnings this quarter, and so far, they’ve pretty much delivered on that expectations.
The big bank stocks’ results have been driven by reserve releases and trading profits as well as continued credit improvement. However, the hoped for increases in mortgage lending has not materialized as home sales are still running below last year’s pace. Moreover, the big financials have been pretty picked over by Wall Street and its legion of analysts, so there’s likely not much upside left in those issues for the rest of the year anyway.
However, some off-the-radar regional bank stocks have turned in solid reports, which is why investors should be turning their attention right now.
Regional Bank Stocks to Buy – Republic Bank & Trust (RBCAA)
Republic Bank & Trust (RBCAA) of Louisville, Kentucky, fell a bit short of analyst expectations, but it was a solid quarter. Earnings came to 30 cents per share, which was the same year-over-year and a little shy of expectations for 32 cents per share.
Core banking operations fell by about 15% YOY as lower interest spreads and a slowdown in mortgage lending weighed on those operations, but the results still were an improvement of roughly 10% over Q1 2014. Also, nonperforming assets continued to decline and are currently at just 1.17% of total assets. The tax refund lending operation, Republic Processing Group, reversed a year-ago loss and finished in the black this year. Republic also announced a dividend payment of 18.7 cents for the quarter.
RBCAA trades at just 87% of book value and yields 3.2% at the current price.
Regional Bank Stocks to Buy – Synovus Financial (SNV)
Synovus Financial (SNV) continues to make huge strides in its long-term turnaround plans.
The Columbia, Georgia-based bank reported earnings that grew to 35 cents per share (excluding restructuring costs) from 24 cents in the year-ago period. The loan portfolio grew by 5.9% led by strong performances in commercial and industrial as well as retail loans. Credit continued to improve, as nonperforming loans dropped by 32% in the quarter. Total nonperforming assets have declined by more than 45% in the past year. Tangible common equity grew to $2.9 billion from $2.5 billion in the second quarter of 2014.
SNV seems to have reversed its difficulties that developed during the credit crisis and is in solid position today.
Regional Bank Stocks to Buy – U.S. Bancorp (USB)
U.S. Bancorp (USB), based out of Minneapolis, is the largest regional bank in the United States, and it too had a solid quarter.
U.S. Bancorp grew quarterly earnings to 78 cents per share from 76 cents a year prior, led by business and commercial banking. Revenues increased by 4.9% on a year-over year-basis.
Other highlights: Commercial loans grew by more than 13%, and commercial real estate lending gained almost 7%. Commercial credit line usage swelled by more than 24% in the quarter. Overall loan growth was 6.8% compared to the second quarter of 2013. Credit continued to improve as well, with nonperforming asset declining by a little over 8%.
As of this writing, Tim Melvin was long SNV.