Stock price when the opinion was issued
A regional bank in the south east US. Interest rates are very low and this is a retail/commercial bank that derives a lot of their money from net interest income. He likes its location, which has lots of good growth over the long-term. They passed all the Fed’s stress tests and are able to accomplish a lot of their capital plans. This bank is over capitalized and at some point in time, you are going to see dividends move up more aggressively along with more share buyback.
This is one of several regional banks in the US. Regional banks for years did particularly well. This year, a number of the regional banks, including this one, haven’t had earnings growth. The earnings numbers are actually down slightly. Stock is not expensive, but without growing earnings it is really, really hard to see this company going very far.
Regional banks are not all the same. He likes the sector. A lot of stocks are getting hit from a macro perspective. When we come out of this correction, leadership will emerge. It is not the weaker stocks coming out that lead, but rather the stronger. He recommends KRE-N as it is trading stronger than 75% of the stocks.
Regional banks are relatively easy to evaluate. They either get processing fees to process mortgages, or they make spreads between what they pay out on their deposits and what they get on their mortgages. Feels they have been undervalued since 2008. Despite the recent rally, this is still undervalued.
A regional US bank. US banks are certainly not expensive, and this is just trading at BV, about 15X earnings. The key to all these banks is that there will be a slightly higher yield curve, allowing them to borrow Short and lend out Longer. Certain aspects of Dodd Frank hurt regional banks more than bigger banks, and if they can make that less onerous for regional banks, that will really help them and save them a lot of cost. This bank can also grow by acquisitions, which he expects will happen. (See Top Picks.)
(A Top Pick Nov 7/13. Up 7.05%.) These banks have all had a real pullback this year. This is in the south-eastern US and has great assets that he thinks are going to be helped by the slow improvement in the US economy and the slow improvement in US housing. This is in a high growth area in the US.