Monday, January 25, 2010

Regional banks start to get some press

From MarketWatch:

BOSTON (MarketWatch) -- Exchange-traded funds that invest in regional-banking stocks have outperformed the broad financial sector so far in 2010 on hopes that smaller lenders' credit losses are easing and that they'll be affected less by potential financial regulation.

Through Jan. 21, the SPDR KBW Regional Banking ETF (KRE 24.35, -0.58, -2.33%) was up about 12% year-to-date, while the overall market as measured by the S&P 500 Index (SPX 1,092, -24.72, -2.21%) was roughly flat.

Regional banks also have jumped ahead of the general financial sector in a trend that's emerged in recent months. The regional-banking ETF gained 22.3% for the three months ended Jan. 21, compared with a loss of 1.1% for the Financial Select Sector SPDR Fund (XLF 14.18, -0.48, -3.26%) , a barometer of large-cap financial shares that's stuffed with large-cap bank stocks, according to investment researcher Morningstar. (continues here)

It's an alright piece. Doesn't mention the elevated short interest in the group, though. In the comments section of the article there was one dude pumping CRBC, but aside from that the sentiment is extremely negative. I'm no fan of fractional reserve banking myself, dudes and dudettes, but that is not the issue right now. These loan portfolios are collateralized by huge swathes the country's industrial capacity. Don't have a billion dollar private equity firm to buy up distressed debt? Buy regional bank shares instead.