Regional Banks Struggle Despite Signs Of Loan Revival
21 October 2010 - 6:40AM
Dow Jones News
Demand for new loans improved in the third quarter at some
banks, but not enough to lift many regional banks' earnings.
Comerica Inc. (CMA) and Marshall & Ilsley Corp. (MI) each
disappointed shareholders in their own way, although U.S. Bancorp.
(USB) continued to report strong results.
Dallas-based Comerica and Milwaukee-based Marshall & Ilsley
both reported results that fell short of analyst
expectations--Comerica because income from lending was weaker than
expected, and Marshall & Ilsley because it took a $200 million
charge tied to a soured business loan. Their shares fell about 8%
in midday trading, while U.S. Bancorp's shares rose 0.3%.
The increase in new credit that a number of banks reported was
meager, but even early signs of an end to the contraction in
lending are positive for banks, which are fighting to return to
firmer footing after the financial meltdown. Lending is the bread
and butter of regional banks, even more so now that many banks
divested other business lines and laws and regulation are
restricting their ability to charge fees.
"What we are seeing is qualified customers are coming back" to
borrow, U.S. Bancorp Chairman and Chief Executive Richard Davis
said during a conference call with analysts. His bank, based in
Minneapolis, has been one of the nation's strongest during the
financial crisis. Its third-quarter profit rose more than 50% to
$908 million. Revenue was $4.6 billion, up 7.9% from a year earlier
and up 1.5% from the second quarter.
U.S. Bancorp bought failed banks and started to aggressively
advertise when the crisis was at its worst. Now the bank's credit
is growing because it lured clients from weaker banks, and even its
existing customers started to borrow again.
"Is this the real deal, we're getting loan growth back?" CLSA
analyst Michael Mayo asked Davis.
The CEO responded, "One quarter doesn't a trend make, but boy
it's a lot better than having the continued decreases" in
demand.
At Comerica, revenue fell because the bank holds fewer loans in
what Chairman and Chief Executive Ralph Babb called a "sluggish and
still uncertain" economy. The bank's third-quarter profit more than
tripled from a year earlier but fell 14% from the previous quarter
to $59 million.
Babb told analysts the bank's loan pipeline is strong and loan
commitments rose nearly 50% from the second quarter. "Commercial
loans increased modestly in the third quarter and total loans
increased in the month of September," he said. The utilization of
business borrowers' existing line of credit increased slightly, to
almost 46%.
Marshall & Ilsley's third-quarter loss narrowed to $169
million from $248 million a year earlier. Chief Financial Officer
Greg Smith told investors during a conference call that the
results, excluding the bad loan, provided the bank with "continued
confidence" that its "recovery is underway."
In other developments, Marshall & Ilsley said Chairman
Dennis J. Kuester and Chief Credit Officer Mark R. Hogan retired.
CEO Mark Furlong was appointed chairman.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
Marshall & Ilsley (NYSE:MI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Marshall & Ilsley (NYSE:MI)
Historical Stock Chart
From Jul 2023 to Jul 2024