MI Marshall & Ilsley Corp

U.S. regional bank earnings Thursday reveal a credit rebound that now extends even to Ohio and the Southeast--two areas that struggled for two years with loan losses.

In Ohio, which suffered badly during the recession, Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN) and KeyCorp (KEY) all revealed their loans books improved markedly during the quarter.

In the Southeast, a hotbed of the banking crisis, SunTrust Banks Inc. (STI) reported a narrower quarterly loss, and said its costs from bad loans could start falling over the second half of the year.

Bearing more sober news Thursday was BB&T Corp. (BBT), whose levels of troubled loans rose in the quarter.

The nation's deep ranks of traditional banks, especially regionals, must still grapple with shrinking sources of future profits--especially the scarce appetite for new loans. But Thursday, even weak regional banks' reports suggest they finally have accounted for a majority of the mistakes they made during the nationwide property bubble, which popped violently in 2008. Shares of several regional banks were strong; Fifth Third's stock was up 10.7% to $12.49 in early afternoon trading.

KeyCorp and Huntington both turned profits because they disbursed millions of dollars into earnings that they previously had set aside to cover loan losses. KeyCorp released $200 million from its loan-loss reserves and Huntington released about $85 million, signaling they no longer expected those losses to occur.

Those credits for both banks proved to be the difference between a quarterly profit and loss. Cleveland-based KeyCorp, which has 1,000 branches in 14 states, earned $70 million--its first profit after eight straight losing quarters.

Huntington, in Columbus, which has 600 branches in six states, earned $48.8 million, up 23% from the first quarter. Huntington has now turned two consecutive quarterly profits after previously posting five straight quarters of losses.

Huntington Chief Executive Stephen Steinour said the bank recently sold $274 million in distressed loans in part to improve the face of its loan books. In an interview with reporters Thursday, Steinour said the bank had a "desire to get our credit metrics better than our peers."

Cincinnati-based Fifth Third earned $192 million during the quarter, its first quarter of operating profits since 2008. Fifth Third, which has 1,300 branches in 12 states, released $109 million from its loan-loss reserves. Its nonperforming loans, or loans nearing permanent default, fell in every category except mortgages.

During the credit bubble, all three Ohio banks made big bets on commercial real-estate loans, which later turned into billions in losses. All three banks also remain part of the federal government's Troubled Asset Relief Program, or TARP.

Shares in KeyCorp were recently up 5.2% to $7.94, while shares in Huntington were recently up 3.4% to $5.86.

Elsewhere near the Ohio River Valley, PNC Financial Services Group Inc. (PNC), one of the strongest banks to emerge from the banking crisis, earned $803 million, nearly fourfold from a year ago. The bank lowered its expenses and widened its net interest margin, or the profit it makes by borrowing at low rates and lending at higher rates. PNC actually increased its provision for loan losses compared with the first quarter, but its levels of nonperforming assets fell 7% from the first quarter.

SunTrust, in Atlanta, which has nearly 1,700 branches in about seven states, disclosed its nonperforming loans fell sharply to $5.5 billion after they had hovered around $6 billion for many quarters.

SunTrust's shares were recently up 10% to $24.69 and PNC was up 1.9% to $59.64.

BB&T, like PNC, was a winner during the banking crisis, buying a large troubled competitor, Colonial Bancgroup. It reported $224 million in net income, up 8% over last year's second quarter. But the bank's provision for credit losses rose after falling in the first quarter. Shares fell 1.7% to $25.47 in recent trading.

BB&T Chief Executive Kelly King did say loan demand rose in the second quarter; he cited auto loans, prime mortgages and traditional loans to businesses.

Earlier in the week, shares of Zions Bancorp (ZION), in Salt Lake City, and Marshall & Ilsley Corp. (MI), in Milwaukee, tumbled as their loan books fared worse in the second quarter than expected.

-By Marshall Eckblad, Dow Jones Newswires; 212-416-2156; marshall.eckblad@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