FBR Capital on Banks and Thrifts: 1Q11 Bank Earnings Recap: Revenues Disappoint as Deleveraging Continues
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Price: $68.14 +0.37%
Rating Summary:
13 Buy, 26 Hold, 3 Sell
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 26 Hold, 3 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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FBR Capital on Banks and Thrifts: 1Q11 Bank Earnings Recap: Revenues Disappoint as Deleveraging Continues
FBR analyst says, "Following the first two weeks of earnings and the majority of banks having reported, we have some insights into industry trends. This quarter started to give us a better idea of what regional banks would differentiate themselves from the underperformers in an economic recovery, while big banks didn't look as resilient as once thought. We did see pockets of loan growth, but that raised more questions concerning the companies' underwriting practices, rather than give us confidence we have hit an inflection point. We are seeing some banks make significant moves to return capital to shareholders as they wait for the economy to come back in earnest, while others are still left trying to play catch-up. Our main takeaways: (1) revenues were down throughout the space; (2) loan growth remained poor; (3) credit trends were better than expected; (4) NIM is holding up well; and (5) mortgage banking revenue did not hold up enough to offset the expected decline in loan portfolios. Overall, we believe this quarter was a perfect example of why the financials continue to be out of favor: outside of massive reserve releases from decent credit metrics, banks are struggling to show fundamental bottom-line growth. Although we have favored the big banks over the regionals given their relatively cheap valuations, we are starting to see some regionals stand out from the crowd given their leverage to C&I lending and improved credit trends. Our top ideas include Zionz (Nasdaq: ZION), PNC Financial (NYSE: PNC), JPMorgan (NYSE: JPM), and Fifth Third (Nasdaq: FITB)."
FBR analyst says, "Following the first two weeks of earnings and the majority of banks having reported, we have some insights into industry trends. This quarter started to give us a better idea of what regional banks would differentiate themselves from the underperformers in an economic recovery, while big banks didn't look as resilient as once thought. We did see pockets of loan growth, but that raised more questions concerning the companies' underwriting practices, rather than give us confidence we have hit an inflection point. We are seeing some banks make significant moves to return capital to shareholders as they wait for the economy to come back in earnest, while others are still left trying to play catch-up. Our main takeaways: (1) revenues were down throughout the space; (2) loan growth remained poor; (3) credit trends were better than expected; (4) NIM is holding up well; and (5) mortgage banking revenue did not hold up enough to offset the expected decline in loan portfolios. Overall, we believe this quarter was a perfect example of why the financials continue to be out of favor: outside of massive reserve releases from decent credit metrics, banks are struggling to show fundamental bottom-line growth. Although we have favored the big banks over the regionals given their relatively cheap valuations, we are starting to see some regionals stand out from the crowd given their leverage to C&I lending and improved credit trends. Our top ideas include Zionz (Nasdaq: ZION), PNC Financial (NYSE: PNC), JPMorgan (NYSE: JPM), and Fifth Third (Nasdaq: FITB)."
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