CHICAGO, Aug. 12, 2011 /PRNewswire/ -- Today, Zacks Equity
Research discusses the U.S. Banks, including Fannie Mae
(OTC: FNMA), Freddie Mac (OTC: FMCC), Heritage Commerce
Corp. (Nasdaq: HTBK), MidWest One Financial Group, Inc.
(Nasdaq: MOFG) and Encore Bancshares, Inc. (Nasdaq:
EBTX).
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http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
A synopsis of today's Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/58874/U.S.+Banks+Stock+Outlook+-+Aug.+2011
While the financials of bigger banks have been stabilizing on
the back of an economic recovery, many smaller banks are still
struggling to survive. Rock-bottom home prices along with
still-high loan defaults and unemployment levels continue to
trouble such institutions relentlessly.
Lingering effects of the financial crisis continue to weigh on many
banks. It becomes a prerequisite for such banks to absorb bad loans
offered during the credit explosion, making them susceptible to
severe problems. The uncertain environment is aggravating the risk
of bank failures.
Furthermore, government efforts have not succeeded in restoring
lending activity at the banks. Lower lending will continue to hurt
margins and the overall economy, though the low interest rate
environment should be beneficial to banks with a
liability-sensitive balance sheet.
Eventually, the strong banks will continue to take advantage of
strategic opportunities, with the big fish eating the little
ones.
Adding to the banking woes are the lingering economic concerns.
Earlier this month, Standard & Poor's downgraded the credit
rating of the U.S. a notch from "AAA" to "AA+" for the for first
time
since 1917.
Moreover, as the Treasury continues to hold huge direct investments
in institutions like Fannie Mae (OTC: FNMA) and Freddie
Mac (OTC: FMCC), S&P also lowered the ratings of these two
government-sponsored enterprises to "AA+" from "AAA."
However, Fitch Ratings retained its stable outlook on the banking
industry for 2011. The rating agency expects the financials of
banks to improve modestly as macro conditions will take some time
to stabilize.
Though it will be awhile before we can write the end for this
crisis story, banks are expected to perk up as the economic picture
stabilizes.
OPPORTUNITIES
The regulatory requirement of focusing on banking institutions
toward higher-quality capital will help banks absorb big losses.
Though this would somewhat limit the profitability of banks, a
proper implementation would bring stability to the overall sector
and hopefully keep bank failures in check.
Specific banks that we like with a Zacks #1 Rank (short-term Strong
Buy rating) include Heritage Commerce Corp. (Nasdaq: HTBK),
MidWest One Financial Group, Inc. (Nasdaq: MOFG) and
Encore Bancshares, Inc. (Nasdaq: EBTX).
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