- The Washington Times - Tuesday, April 21, 2009

NEW YORK (AP) - Midsize and regional banks are finding themselves in the same predicament as big names like Goldman Sachs and JPMorgan: Facing more losses as more people fall behind on their loans.

Banks like KeyCorp, Huntington Bancshares Inc., Comerica Inc. and Zions Bancorp are reporting losses for the first quarter, while U.S. Bancorp, Regions Financial Inc. and M&T; Bank Corp. said profits dropped sharply.

The disappointing reports have been a stark reminder of the troubles still plaguing the banking industry, but many bank stocks rose nonetheless Tuesday after Treasury Secretary Timothy Geithner told Congress that “the vast majority” of banks have more capital than they need.

Though Geithner’s comments gave the market a boost, the underlying fundamentals in many of the earnings reports are still cause for concern.

Cleveland-based KeyCorp said it lost $488 million in the first quarter due to higher credit costs. A year earlier, it earned $218 million. The bank also chopped its dividend to a penny a share from 6.25 cents. Shares slid 14 cents to $7.26.

Huntington lost $2.4 billion in its first quarter, largely because of a $2.6 billion goodwill charge. But the Columbus, Ohio-based bank said the sagging economy throughout the Midwest markets continues to weigh on its loan portfolio, particularly residential mortgages and commercial loans. Shares jumped 29 cents, or 9.3 percent, to $3.40.

Zions Bancorp also posted a loss for the first quarter, reversing a year-ago profit, as the Salt Lake City-based bank recorded a hefty impairment charge and wrote down the value of investments.

Zions said late Monday that loans considered past due jumped to $1.77 billion, driven by commercial real estate loans in Nevada, Arizona and Texas. Zions shares plunged more than 10 percent, falling $1.40 to $11.53.

Some banks are faring better than others. Historically low interest rates have led to a spike in mortgage activity, and brokerage revenue has picked up amid the recent surge of confidence on Wall Street.

U.S. Bancorp’s profit fell 61 percent, but results beat analysts’ expectations as mortgage revenue more than doubled. Many banks have announced strong mortgage banking revenue for the first quarter thanks to declining interest rates and a surge in refinancing activity. U.S. Bancorp’s shares jumped more than 15 percent, adding $2.48 to $18.42.

Regions Financial managed to eek out a profit of $26 million, or 4 cents per share, also boosted by strong deposit and loan growth. Shares rose 66 cents, or 11.4 percent, to $6.46.

Those banks that have been able to increase their market share and boost business are in a position of strength, said Matthew Warren, associate director of equity research at Morningstar.

“The new loans that are coming onto the books are coming on at tighter underwriting standards and better margins,” he said. “The new business is highly profitable.”

But for those banks that are reporting losses and are light on capital, “that’s a bad place to be,” he said.

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