Trader Talk

Regional Bank Woes Signal A Long Recovery


Regional banks hit new lows today, as traders gave up on any short-term recovery and the hope that the worst is behind us. Big names like KeyCorp, Zions Bancorp, National City, SunTrust, and M&Thit new lows today.

Richter's Tickers

What's the problem? This is where the difference between the regionals and the big money center banks (Citi , B of A , JP Morgan ) becomes clear.

Regional banks are slow-moving animals. Regional banks don't have the capital to change directions as quickly as money center banks. Many regional banks are underreserved against losses in construction and residential loans, and now that traders realize that problems in housing (and maybe even commercial construction) are not going away immediately, there is concern that reserves for losses at many of the regional banks may not be adequate.

Finally, the monthly survey of home builders from the National Association of Home Builders hit an historic low today (they started they survey in 1985)--indicating that builders are still gloomy and there is no immediate sign of a bottom in housing. As one trader noted, the only question for the industry looking ahead is how much do prices need to fall in order to normalize inventory levels.

Questions?  Comments?