In the race to recovery, several regional banking companies are distancing themselves from the pack.
The entire industry still faces serious challenges, but analysts say these five companies are beginning to stand out: BB&T Corp., M&T Bank Corp., PNC Financial Services Group Inc., TCF Financial Corp. and U.S. Bancorp.
There are several criteria for separating leaders from laggards, including credit quality, capital levels, loan growth and regulatory risk. But no matter how they cut the data, market watchers frequently identified the same five banking companies as having scraped through the crisis to get ahead the past two years.
"These guys are playing much more on the offensive front," said Jason Goldberg, an analyst at Barclays Capital. "Many of these banks are underappreciated by the market. The key for all of them going forward will be to grow their balance sheets and stay profitable."
BB&T, M&T, PNC, TCF and U.S. Bancorp collectively earned more than $5.5 billion in 2009, when many other regionals finished in the red. All but M&T have exited the Troubled Asset Relief Program, freeing them of the government strings that still hamper many rivals.
A key differentiator for U.S. Bancorp, TCF and BB&T, one that became clear during quarterly reports, was their ability to lend at a time when many competitors are feeling pressure to shrink their balance sheets. U.S. Bancorp's loan portfolio grew 5.3% in the fourth quarter compared with the third quarter. At TCF, of Wayzata, Minn., the loan book grew 3.2%, and BBT's grew 0.3%.
PNC's loan book shrank by 1.9% during the last quarter of 2009, but analysts like the Pittsburgh company's portfolio, which has a relatively low concentration of commercial real estate loans — the asset category many say poses the greatest risk over the next few years. PNC, with a $157.5 billion portfolio, has the smallest concentration of CRE loans among the big regionals — 14.98%. It was 29% among 15 major regionals at yearend.
U.S. Bancorp (19.8% of yearend loans) and TCF (22.6%) also have manageable levels of CRE. About a third of BB&T's loans are tied up in CRE, but analysts have largely viewed the Winston-Salem, N.C., company as being able to handle its credit risks. Its net interest margin has expanded, partly thanks to last year's government-assisted purchase of Colonial Bank, which came with generous asset protections from the Federal Deposit Insurance Corp.
Even if credit problems worsen, analysts noted, BB&T and PNC in particular still have strong capital levels — at or above the average for regional banking companies.
All these companies are likely to dodge the brunt of a White House plan to force big banks out of internal proprietary trading and private equity. U.S. Bancorp provided some insight into the exposure these banks face from regulation, estimating earlier this month that major regulatory changes could cost $400 million to $550 million each year, whether through higher costs or reduced revenue.
