SOURCE: The Bedford Report

The Bedford Report

October 11, 2010 08:46 ET

Weak Loan Growth Offset by Modest Improvements in Credit Quality for Regional Banks

The Bedford Report Provides Analyst Research on Huntington Bancshares, Inc. and US Bancorp

NEW YORK, NY--(Marketwire - October 11, 2010) - Regional Banks have been mounting somewhat of a comeback in 2010. One of the factors generating optimism has been the modest improvements in credit quality. Last month The Federal Reserve observed that the credit quality of large loans that US banks were committed to make in 2010 was still weak but not as bad as in 2009. 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. Meanwhile, their funding costs are dropping as depositors have become more willing to accept lower rates on their money. The Bedford Report examines the outlook for companies in the Mid-Atlantic Regional Banking Industry and provides research reports on Huntington Bancshares, Inc. (NASDAQ: HBAN) and US Bancorp (NYSE: USB). Access to the full company reports can be found at:

While the improving margin helped narrow losses and boost profits among the regional banks, long-term growth worries still loom. According to recent quarterly earnings released by banks such as US Bancorp and many of its Industry peers, loan growth has steadily declined due to economic uncertainties. As evident from the high unemployment numbers, companies are not hiring at the pace most expected this year, while capital spending is way down.

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In September banks found out they will face yet another hurdle as regulatory officials from 27 countries have come up with a new set of capital standards known as Basel III. Basel III is likely to affect dividend growth. According to the proposals under Basel III, only if a bank operating in a steady economic environment maintains a Tier 1 capital ratio of 12% would it be allowed to pay or increase common dividends.

US Bancorp recently declared a quarterly dividend of 5 cents per share. The company said the dividend is payable Oct. 15 to shareholders of record Sept. 30. USB says it will first digest recent global and U.S. regulatory changes and wait for regulatory approval before considering a dividend hike.

Presently Huntington Bancshares pays a modest annual dividend of four cents as the company has yet to pay back TARP. Huntington's CEO, S.D. Steinour, was recently quoted saying the company has yet to set a TARP payback date. Steinour hinted that the holding company would like to see economic stability, and also believes they will need to raise Capital before repaying TARP.

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