SOURCE: The Bedford Report

The Bedford Report

September 23, 2011 08:16 ET

Operation Twist to Spur Loan Growth at Regions Financial and Fifth Third Bancorp

The Bedford Report Provides Equity Research on Regions Financial & Fifth Third Bancorp

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 Regions Financial Corporation (NYSE: RF) and Fifth Third Bancorp (NASDAQ: FITB). 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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Hinting that the troubled Regions Financial may have bottomed out, S&P recently lifted its outlook on the bank, as the ratings agency said it is impressed by Regions' improved loan performance. For the second quarter Regions Financial said loan-loss provisions were reduced to $398 million from $651 million a year earlier.

Fifth Third Bancorp recently boosted its return to shareholders. The company raised its third-quarter dividend 33 percent to 8 cents per share from the previous quarter's 6 cents, the second increase this year after the regional bank repaid a taxpayer bailout extended during the financial crisis.

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