In light of the 2008 financial crisis, many investors have been hesitant to dip their toes back into the banking sector, due to the uncertainty and volatility that plagued this corner of the market.
However, as the Fed gears up to abandon its ultra-loose monetary policy and start raising rates in the foreseeable future, investors may want to re-consider bank stocks as they stand to offer lucrative growth potential amid a strengthening economic recovery.
Digging deeper, some may wish to access the banking sector through a more local approach; that is to say, some regional banks could make for enticing opportunities for investors who are looking to steer clear of the more well-known “big banks” on Wall Street [see also History of Bank Stock Dividends: Still Little Recovery from Financial Crisis].
Top 10 Biggest Regional Banks
Regional banks are depository institutions that for the most part operate in one region of the country, all the while offering similar services as their national counterparts such as deposits, loans, mortgages, and credit cards, just to name a few. The table below offers a comprehensive look at the regional banking industry, which as you may have suspected, falls under the Financial Sector umbrella.
For a more detailed look at each segment of the industry, simply click on anyone of the various regions below (data as 1/21/2015):
| Region | Number of Companies | Average Dividend Yield |
|---|---|---|
| Northeast | 59 | 2.69% |
| Mid-Atlantic | 45 | 2.48% |
| Pacific | 32 | 2.65% |
| Midwest | 39 | 2.46% |
| Southeast | 21 | 2.53% |
| Southwest | 19 | 2.08% |
When it comes to individual securities, some may be surprised to find that a number of regional banks boast market caps well upwards of $10 billion and even $20 billion. Furthermore, many of these firms also have impressive dividend growth histories, making them worthwhile considerations for even the most conservative, income-minded investors [see also A Brief History of JP Morgan’s Massive Fines].
The table below lists the 10 biggest regional banks by market cap; also listed is the number of years that each bank has been consistently growing its distribution for:
| Ticker | Name | Region | Market Cap (in Billions) | Years of Consecutive Dividend Increases |
|---|---|---|---|---|
| (USB ) | U.S. Bancorp | Midwest | $73.74 | 4 |
| (BBT ) | BB&T Corporation | Southeast | $25.76 | 3 |
| (MTB ) | M&T Bank Corporation | Northeast | $14.91 | 0 |
| (FITB ) | Fifth Third Bancorp | Midwest | $14.90 | 4 |
| (RF ) | Regions Financial Corporation | Southeast | $12.03 | 2 |
| (KEY ) | KeyCorp. | Midwest | $10.62 | 4 |
| (HBAN ) | Huntington Bancshares Incorporated | Midwest | $7.96 | 2 |
| (ZION ) | Zions Bancorporation | Pacific | $4.95 | 2 |
| (PACW ) | PacWest Bancorp | Pacific | $4.31 | 4 |
| (TFSL ) | TFS Financial Corp | Midwest | $4.24 | 0 |
Regional Banks Performance Since Market Bottom
Next, let’s review how the biggest bank (by market cap) from each of the six broad regions (see first table) has performed since the depths of the most recent financial crisis:
In this instance, Fifth Third Bank (FITB ), has been able to deliver the strongest gains since the market bottomed out in 2009 despite not being the largest of its category.
The Bottom Line
Regional banks offer an alternative way to access the domestic banking sector for those who wish to steer clear of well-known firms that operate on a national scale. Given their more localized nature, regional banks boast a number of location-specific risks that might not be as prevalent for their national counterparts; likewise, these securities may also offer opportunities that are not available elsewhere in the financial sector. Be sure to thoroughly research not only the specific bank you wish to invest in, but also the region that it operates in before pulling the “buy” trigger.
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