Wednesday, April 18, 2012

Regional Banks in Focus: U.S. Bancorp (USB; IAT)

IAT is the iShares Dow Jones U.S. Regional Banks Index Fund. Because it is cap-weighted it has more USB exposure than the KRE or KBWR.
USB is one of the best managed banks in the country.
From Schaeffer's Research:
Last week, I touched on the fact that regional banks have been outperforming multi-national banks during recent months. One stock in particular that looks interesting is U.S. Bancorp (USB). On March 13, the stock broke out above multi-time frame resistance at the round-number $30 area on huge volume. The shares were soon met with numerous valuation-related downgrades from brokerages as targets were reached. While many stocks might have plummeted on the string of bad news, USB simply went into a consolidation period.

Yesterday, the company reported first-quarter earnings, and they were better than expected. One of the interesting parts about its report was that mortgage banking drove most of USB's revenues. While big banks like Citigroup (C) and Bank of America (BAC) were busy trying to get rid of all their bad debt, USB was pouncing on the opportunity to reinvest their capital and earnings. They also have less exposure to overseas markets than many of the multi-national banks do. (Does anybody remember Europe and China?) From a fundamental perspective, this is one reason why regional banks like USB are looking more and more attractive....MORE