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Click on individual bank names in the table below to access American Banker's coverage of each company's earnings report. Links to relevant coverage, filings, and releases can be found in the Related Links area of each article.
January 28
Regions Financial Corp. and KeyCorp can't seem to get off the crisis treadmill.
True, both companies made progress in cleaning up their books and retooling business lines in the fourth quarter. Their efforts to address lingering credit losses and a still-sputtering economy were not markedly different than those of other regional banking companies, and in certain sectors both enjoyed limited growth.
But because of their initial portfolios and geographic exposures, Regions and KeyCorp are finding weakness in asset quality and the overall recovery to be especially stubborn.
"Those areas of the country where we had a lot of loan demand in the past, it's not there," said banking analyst Bert Ely. "That means butting heads against other banks and lenders that are more established in these markets."
Though Regions posted its first profit in seven quarters, at $36 million, or 3 cents a share, it was the result of a $333 million, one-time gain on securities sales. After dispositions and resolutions, the company's total nonperforming assets fell 10%, to $3.9 billion, and its allowance for loan losses shrank by more than 40%, to $682 million.
The company also showed some progress toward stemming the decline in its loan balances. Though total loans fell 2%, to $82.6 billion, the company reported $1 billion in new commercial and industrial lending, a 5% annual growth rate.
"What we've seen in the fourth quarter is some of the best loan production we've seen in quite some time," said Regions Chief Executive Officer Grayson Hall. Commercial loan production improved by 48%, year-over-year, he said. "That hasn't translated yet to balance sheet growth, but it's a very positive sign."
The bank's investment and private banking earnings also strengthened, as reflected in a 12% gain in revenue at the Morgan Keegan & Co. unit.
But even as Regions showed progress in disposing of troubled assets and cutting costs, fallout from its real estate portfolios impeded its recovery.
"We are still making CRE loans," Hall said. "The demand for that product is fairly limited, and it is much better written, much better priced, but it is not sufficient to sustain the level of CRE that we have."
The company reported a small improvement in its industry-lagging net interest margin, at 3%, but it warned that near-term pressures might prove a drag this year.
In response to analysts' questions about the pace of Regions' recovery and its ability to repay its $3.5 billion in Troubled Asset Relief Program borrowings, Hall argued for patience while acknowledging that repayment has come to be seen as a benchmark of health.
"I do not think Tarp is a competitive problem, either on the consumer or commercial side," he said. "At the end of the day, most of the stigma around Tarp is internal, with our people, and external, with our investors."
At Cleveland's KeyCorp, net income attributable to shareholders rose 57% from the prior quarter, to $279 million, the $92 billion asset-company's best result in more than a year. It lost $265 million a year earlier.
Chargeoffs and nonperforming loans declined for at least the fourth straight quarter, prompting a $97 million release of credit reserves.
KeyCorp said reserve releases should continue through 2011 because it expects chargeoffs to exceed provisions for the rest of the year. Its allowance for loan losses was $1.6 billion, down 18% from the prior quarter and 37% from a year earlier.
Its corporate bank had a banner quarter, aided by higher fees from helping more companies raise debt and syndicate loans, among other things.
Corporate banking revenue rose 7.9% from the prior quarter and 36.5% from a year earlier, to $464 million.
Chris Gorman, the president of Key's corporate bank, said last quarter's uptick in client activity bodes well for its loan-growth prospects. It helped 90 new business clients raise capital, generating $60 million in fees.
"These are new clients that will be borrowing," Gorman said.
But KeyCorp's fee income was weak in all areas outside of investment banking and capital markets. And trust and investment services income were down, as were service charges to deposit accounts.
In lending, average total loans shrank 3% from the third quarter, to $50.8 billion, reflecting runoff in everything from construction to home equity lending. KeyCorp is running off about $5.4 billion of recreational vehicle, home builder construction and other consumer and business loans. For that reason, it said, it does not expect overall loan growth until the second half of the year, at the earliest.
In a research note, Sandler O'Neill Managing Director Scott Siefers said that KeyCorp's numbers lead him to believe the company will develop increasingly better control of its credit issues this year.
"However, beyond this directional expectation and our best guess for magnitude, it is nearly impossible to quantify," he wrote.
"Aside from credit, the company still has a major earnings headwind in that about 13% of assets are either in an exit portfolio or discontinued operations," he said.
It is among the last big Midwestern banking companies that has yet to repay its federal aid, putting it at a potential competitive disadvantage to the companies that have, such as U.S. Bancorp in Minneapolis and Huntington Bancshares Inc. in Columbus, Ohio.
Henry Meyer 3rd, Key's chief executive officer, said repaying its $2.5 billion of Tarp funding is a top priority now that its loan losses are distinctly declining and revenue is growing in key areas like corporate banking.
KeyCorp is one of the 18 stress-tested banks that is required this month to submit to regulators data showing that it has the capital to raise dividends or repay Tarp.
Meyer said KeyCorp, having submitted its plan on Jan. 7, must wait for regulators' response before returning Tarp money.
An analyst asked him whether repayment is a personal goal to achieve before his retirement in May.
Meyer was noncommittal, saying the needs of the company and its shareholders come first.
"It's hard for me to answer any of that," Meyer said. "My guess" is that "it'll be right around that date," he said. "There's no pressure on me."
