CNBC Stock Blog

How to Play The Regional Banks: Strategists


Several regional banks have been trading near their 52-week highs in the last few days. Do they have further room to run? Craig Siegenthaler, analyst at Credit Suisse, and David Katz, chief investment officer at Matrix Asset Advisors, shared their sector outlooks.

Spotlight on Regional Banks

“If you’re lending in the Michigan and Ohio auto sectors and if you’re in Texas lending to the energy sector, these are areas where there wasn’t as much cash on the balance sheet, growth has come back faster and they need credit," Siegenthaler told CNBC.

"These are areas that are going to recover faster, so there are some green spots in the lending front.”

Regional banks' large exposure to commercial real estate had been worrying investors, on speculation that it would be the next bubble to burst.

But Siegenthaler said the situation is more subtle than that:

“It hasn’t gotten as bad as many people had thought—it’s just going to stick around for a while.”

Don't expect normalized earnings from regional banks until 2013, as commercial real estate problems will be around for two more years, added Siegenthaler.

Counterpoint: Think Big

In the meantime, Katz said while regional bank stocks are reasonable, they are not going to see a continued rally as they have seen in the last quarter.

“We think that the big banks and the trust banks which haven’t done a lot in 2010 are poised to be the leadership going forward,” he suggested.

More on Financials:

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Top Regional Banks:

Fifth Third


Zions Bank


Regions Bank


Siegenthaler does not own shares of FITB, BBT, BOH, CMA, FHN, KEY or USB.

No immediate information was available for Katz or Siegenthaler.