A Wall Street Transcript Interview with Thomas S. Mitchell, Senior Analyst at Miller Tabak + Co., LLC: Which Regional Banks Possess the Underlying Fundamentals for an Acquisition Spree?

Wall Street Transcript

67 WALL STREET, New York - February 12, 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: BB & T Corp. (BBT), FirstMerit Corp. (FMER), Huntington Bancshares Inc. (HBAN), Fifth Third Bancorp (FITB), Regions Financial Corp. (RF), Zions Bancorp. (ZION), City National Corp. (CYN)

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

TWST: How would you characterize 2013 for the banks from an operating point of view?

Mr. Mitchell: Just purely from an operating point of view, it continued to be quite sluggish. We saw continued compression on net interest margins and slow loan growth generally almost across the board. There were a few exceptions.

I think if we said organic loan growth, very, very few banks had actual organic loan growth of any respectable size. So that once again, as we've experienced for a number of years, there has been pressure on profit margins, and excluding any adjustment for changes in the credit situation - which have improved a great deal - business has been relatively slow, I would say at least as slow as the economy for most banks.

And then later in the year, we did begin to see higher interest rates make some difference, although not a lot of difference yet, in net interest margins for many banks. But we also saw a real nosedive in mortgage applications in 2H 2013, which for some banks, not all, but for some regional banks is an important source of income. And that appears to have - it's off about 75% - mortgage applications for refinance are off about 75% from where they were near the beginning of May. So I think that there's a very distinct possibility that we'll be starting 2014 still with relatively sluggish operating numbers reported for the fourth quarter.

TWST: That doesn't sound like it was a very bright environment. Why did the banks, from an equity perspective, do so well?

Mr. Mitchell: I think there were a couple of factors...

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.

Rates

View Comments (0)