Regional banks have recovered strongly and are performing much better than the four banks. According to a recent article in the journal regionals are increasing lending and accordingly earnings are growing rapidly. The 4th quarter 2012 earnings reported so far by some of these banks are cheering investors who are bidding up the stocks prices. From the WSJ article:
Adding to the toxic brew for some larger banks is public disaffection with giant firms that are perceived as slow and unresponsive and, in some cases, as having benefited disproportionately from government bailouts in 2008 and 2009 without offering commensurate benefits to the public.
The business model in use at Bank of America and Citigroup is “too big to profit, not just too big to fail,” said Joshua Siegel, chief executive of StoneCastle Partners LLC, a New York firm that invests in banks. Revenue declined in 2012 for the third consecutive year at Bank of America and for the second year in a row at Citigroup. Revenue at the two companies has declined $50 billion, or 24%, from its peak.
In the past year, in contrast, revenue rose 12% at BB&T, 10% at Fifth Third and 8% at PNC.
The future looks promising for smaller banks as the economic recovery takes hold. Investors looking to gain exposure to the US banking sector are better off going with the regionals and community banks as opposed to the large banks.
Five of the regional banks and their current dividend yields are noted below:
1.Company: Fifth Third Bancorp (FITB)
Current Dividend Yield: 2.44%
2. Company: PNC Financial Services Group Inc (PNC)
Current Dividend Yield: 2.59%
3.Company: U.S. Bancorp (USB)
Current Dividend Yield: 2.37%
4.Company:BB&T Corp (BBT)
Current Dividend Yield: 2.58%
5.Company: State Street Corp (STT)
Current Dividend Yield: 1.80%
Note: Dividend yields noted are as of Jan 17, 2013
Disclosure: Long USB, PNC, BBT and FITB