Wall Street Transcript Interview with Christopher Marinac, Managing Principal & Director of Research and Brian Martin, Vice President & Research Analyst at FIG Partners: Bullish on Banks

Wall Street Transcript

67 WALL STREET, New York - February 1, 2013 - The Wall Street Transcript has just published its Southeast & Midwestern Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Consolidation in Regional Banking - Growth in U.S. Midwest - Regulatory Obstacles and Fee Income Replacement - Rise of Commercial and Industrial Lending

Companies include: MB Financial Inc. (MBFI), Pinnacle Financial Partners In (PNFP), Eagle Bancorp, Inc. (EGBN), BB & T Corp. (BBT), SunTrust Banks, Inc. (STI), Regions Financial Corp. (RF), Fifth Third Bancorp (FITB), KeyCorp (KEY), Bank of America Corporation (BAC) and many others.

In the following excerpt from the Southeast & Midwestern Banks Report, two expert banking analysts discuss their outlook for the sector and reveal their top picks:

TWST: So what's your overall sentiment on the banking space in the region you're focused on right now, and why?

Mr. Marinac: I think that, economically, things are slowly but surely improving. We have some markets in the Southeast that really never saw the recession - Texas cities like Houston and Dallas and whatnot. New Orleans, Lafayette and many cities in Arkansas really didn't see the downturn, because the energy business has been solid and seemingly getting even better. If you go to cities such as Atlanta and Charlotte and D.C., there certainly was a recession, but it varied. D.C., there wasn't as much; there was a pretty severe recession in Atlanta.

But all signals are pointing in a better direction than they have been. We are seeing better job growth; although it's not uniform, we are seeing in general better job growth, and I think the banks are slowly but surely getting back on their feet. We're seeing credit quality improve, we're seeing little better signs of loan growth - although I don't want to be too optimistic because it's a very challenging year; because interest rates are low, it is awfully competitive in the marketplace, and it doesn't really change much as you go from city to city around the country.

Mr. Martin: I would say, just touching on some of the earnings season thus far, I think in general we've seen loan growth come in better than expected for most companies. Some of that has to do with year-end tax planning. I think mortgage banking has certainly been strong, and I think there's a lot of expectation that that is slowing down in the second half of this year, but still strong in the first half of the year.

I think in general the margin has held up better than expected. In a lot of banks it's certainly down, but not down as much as maybe some had thought. A lot of people are indicating that 2014 may see more pressure than 2013 as it relates to opportunities to still lower their cost of funds somewhat this year, and not seeing a lot of change one way or the other on the expense basis for a lot of companies - nor have we seen a lot of staff reductions or branch closures, which may present opportunities in 2013 and 2014 depending on how revenues track.

TWST: Chris, you mentioned there are some signs of growth. What areas of growth are most promising right now?

Mr. Marinac: I think banks are having success getting C&I business and are increasingly doing more commercial real estate. We don't have full 4Q data yet for the industry, but we think that there is going to be better signs of real estate growth. We also are seeing companies hold more mortgages. Companies are doing an awful lot in the residential mortgage side, and they're actually retaining some of those as a way of putting out cash and liquidity to work. There's so much liquidity in the system that many companies are finding that it's just easier to go ahead and have the mortgages held on the balance sheet because it beats cash. So you may not be getting a great spread, but you're getting something, which is incrementally helpful.

Mr. Martin: A lot of these banks are obviously looking at the C&I piece, but after the last couple of years of just winding down and reshuffling some of their balance sheets, there are banks now selectively looking to grow the C&D book and the commercial real estate book to maybe pick up a little bit better yield, given the competitive nature on the C&I side...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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