A Wall Street Transcript Interview with Nick Karzon, a Senior Research Analyst with Credit Suisse Group Covering Smid-Cap Banks in the Midwest, Southeast, Mid-Atlantic and Pacific Regions: A Positive Outlook as Regional Banks Deploy Excess Capital Into Loan Growth

Wall Street Transcript

67 WALL STREET, New York - February 6, 2014 - 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: Interest Rates and Loan-Growth Strategies - Regulatory Outlook Gains Clarity - Investing in Regional Banks - Heightened M&A Activity - Consolidation in Regional Banking - Increased Lending Opportunities - Heightened Banking Competition - Benefits from Higher Interest Rates

Companies include: TCF Financial Corporation (TCB), First Horizon National Corp. (FHN) and many others.

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

TWST: We're in a new year; what's the general outlook that you are holding for the banks for 2014?

Mr. Karzon: We're positive on the banks at this point. We upgraded the group in September and we remain positive heading into 2014. There are a couple of areas that we think are continuing to improve. When we think about the catalysts for the group, we really like the ability to return excess capital. This isn't necessarily a short-term thesis, but over the next two to three years now that we've finally got a little bit more certainty around Basel III requirements. More banks are going through stress testing, and banks are starting to get a little bit more comfortable with regulatory expectations, so that's one piece of the long-term thesis for us.

And the second piece is the interest rate story and what we're expecting over the next couple of years. Currently, bank net interest margins or NIMs are under pressure as a result of the lower rate environment. As rates rise and as we get closer to a Fed rate hike, we expect net interest margins to stabilize and then improve over the next couple years. We still feel a little bit of pressure in the near term though.

You're still seeing higher-priced fixed rate loans roll off, and LIBOR is actually down a little bit year to date. Even from the end of 2013, we're still seeing some pressure on short-term rates. So that's a little bit of a drag on near-term earnings power, but longer term we do see that environment improving and generating a little bit more earnings power for the regionals.

TWST: You talked about return of capital. Is that because the banks really don't have any place to put it?

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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