Wall Street Transcript Interview with Mark Palmer, Managing Director and Equity Analyst with BTIG LLC: Regional Banks Grow Commercial Loans and Tussle with NIM Pressures

Wall Street Transcript

67 WALL STREET, New York - February 7, 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: MBIA Inc. (MBI), Assured Guaranty Ltd. (AGO), CIT Group, Inc. (CIT), Comerica Incorporated (CMA), SunTrust Banks, Inc. (STI), KeyCorp (KEY), Zions Bancorp. (ZION), Conseco Inc. (CNO), Genworth Financial Inc. (GNW), H&R Block, Inc. (HRB), iStar Financial Inc. (SFI), Moody's Corp. (MCO), FactSet Research Systems Inc. (FDS), Bank of Montreal (BMO), First Niagara Financial Group (FNFG) and many more.

In the following excerpt from the Southeast & Midwestern Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Where are these banks experiencing growth today?

Mr. Palmer: Some of the banks are seeing improvements in commercial loan growth. A lot of that has to do with both geography and the strength of the individual bank's franchise. I mentioned Comerica (CMA). Comerica made a controversial acquisition of Sterling Bancshares in Texas a couple of years ago. It was controversial insofar as Comerica paid 2.3 times book for the bank.

Ultimately, since it was a stock-for-stock deal, the multiple they paid was significantly less. But even for those who would argue that that was a massive overpayment, it's hard to argue against the results that Comerica has shown as a consequence of its increased Texas penetration thanks to owning Sterling. So there you're seeing commercial loan growth help Comerica - which has a portfolio which is 85% floating rate - to nevertheless deliver earnings beats and see its shares appreciate, because it's able to offset the pressures on its net interest margin and net interest income.

KeyCorp (KEY), which just reported, for the second straight quarter showed an expansion of its net interest margin by 14 basis points - which is to say they expanded by 14 basis points in the third quarter and then again by 14 basis points in the fourth quarter - while many analysts were predicting that they would experience contraction in the fourth quarter.

That improvement is due to a couple of different factors. One is that KeyCorp had over $1 billion in certificates of deposit with an average yield of 1.5% that had been rolling off, so it had an opportunity to increase its NIM as a consequence. But the other major factor is, again, the more that a bank is able to lend out capital to commercial, agricultural, financial firms and generate a better yield, the better able it will be to offset the pressures that it's facing....

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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