UBS Gets Bearish on Four Regionals, Cites 'Sluggish' Growth in Revs (RF, HBAN, TCB, KEY)

Warning of a "sluggish" recovery in the sector, UBS downgraded several regional banks today.

The firm said that they think the regionals, while en fuego right now, may be in for a rough H210 due in part to a protracted credit recovery and sluggish revenue growth.

In that note, UBS downgraded Huntington Bancshares (NASDAQ: HBAN), Keycorp (NYSE: KEY), Regions Financial (NYSE: RF), and TCF Financial (NYSE: TCB) from Neutral to Sell.

The analyst making the call said that "citing factors that include a more protracted credit recovery, slower progress on residential and commercial real estate credit, and lower overdraft fees that could take a bite out of earnings." The analyst states that the current valuations are "unsustainable."

UBS "continues to believe the pace of earnings recovery will fall well short of expectations. They expect earnings at the regional banks to be held back by not only a fat credit tail in residential and commercial real estate but also the impact of balance sheet shrinkage, more muted margin expansion, and lower overdraft fees on their ability to grow revenue."

Key stats today on the news, and for next week are:

• Huntington Bancshares are down 5.64% to $5.69. The bank is reporting their earnings on April 20, 2010. Huntington opened the year at $3.71, making YTD gains of about 53%;
  
  
• Keycorp is down 3.12% to $8.08, and their earnings release date is April 21, 2010. Shares of the bank have surged 42% since January 1, 2010;
  
  
• Regions Financial shares are down 2.97% to $8.48, with an earnings release on April 21, 2010. Shares are up 58% YTD; and
  
  
• TCF Financial is trading 3.95% lower to $16.31. Their earnings are expected on April 22, 2010. Shares have gained 19% for the year.

Two ETFs to keep in mind also, are:

• SPDR KBW Regional Banking (NYSE: KRE) down 0.86% to $27.57; and
  
  
• iShares Dow Jones US Regional Banks (NYSE: IAT) down 0.95% to $26.06.

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