SOURCE: The Bedford Report

The Bedford Report

September 23, 2011 08:16 ET

Bernanke's Operation Twist to Drive Loan Growth for Regional Banks

The Bedford Report Provides Equity Research on Synovus Financial & Huntington Bancshares

NEW YORK, NY--(Marketwire - Sep 23, 2011) - Regional banking stocks were hammered earlier this week after the Federal Reserve announced it will push long term interest rates lower. On the upside, "Operation Twist" is designed to spur loan growth -- something regional banks have struggled to regain in the aftermath of the recession. The Bedford Report examines the outlook for companies in the Regional Banking sector and provides equity research on Synovus Financial Corporation (NYSE: SNV) and Huntington Bancshares, Inc. (NASDAQ: HBAN). Access to the full company reports can be found at:

In its statement, the Fed noted that the economy is growing slowly, unemployment is high and housing remains in a prolonged slump. The central bank said in a statement that operation twist was aimed at reducing the cost of borrowing for businesses and consumers, including the cost of mortgage loans. It hopes that the lower rates will encourage companies to build new factories and hire more workers, and consumers to start spending again on homes and cars and clothes and vacations.

In recent quarters, regional banks have begun to post improved credit quality. More thorough and cautious credit checks have led to fewer delinquent loans and greater financial stability. As such, Banks are setting aside less money to cover bad loans, and some are seeing loan losses recede. While credit quality improved, the high unemployment rate has been damaging to banks' long term loan growth.

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Huntington Bancshares showed improving financial results this summer. Second quarter net charge-offs were down 41% sequentially and 65% year over year at $97.5 million. Huntington also declared an increase in its quarterly dividend to 4 cents per share from 1 cent paid in the prior quarter.

In the most recent quarter Synovus cut its provision for loan losses, the money set aside to cover loans it couldn't collect, by more than half to $120.2 million, from $298.9 million a year ago.

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