3 Regional Banks That Represent Good Long-Term Opportunities

Includes: FITB, HBAN, USB
by: Brian Nichols

The 3 regional banks listed below are showing large financial improvements, appear to be getting stronger, and are operating more efficiently. I believe that each stock presents a good long term opportunity, but could experience more loss during the immediate future within the volatile financial sector. Yet, I believe it gives investors an opportunity to buy a stock that is cheap with a strong likelihood to see gains in the future, if the investor is trading for long term goals.

Below are my picks for the best regional banks in the financial sector with strong dividends, improved financial performance, and the potential to grow. The chart below lists the three companies that I believe will post large gains in the coming future. Each stock is trading with a modest price to earnings ratio and has posted gains over the last month.

Regional Banks



Market Cap



3-Month Performance

1-Month Performance

U.S. Bancorp







Fifth Third Bancorp







Huntington Bancshares







U.S. Bancorp (USB) is a multistate financial holding company with services in lending and deposits. The company has increased its sales each of the last 3 years with 2011 on pace to significantly outperform year-over-year. The company is operating more efficiently, posting higher net income year-over-year and trades with a strong balance sheet. The company has increased its assets by more than 35% and has lowered its debt by nearly 18% since 2007. The company has put a strong emphasis on its balance sheet and has made good business decisions over the last few years.

There are 24 analysts that cover this stock and 12 have USB as a strong buy, 2 list the company as a moderate buy, and 8 believe the stock is a hold. The one year target for this stock is $29.95 which is a 26% gain from its current price of $23.77. I believe it's likely that the company will exceed expectations as its income statement and balance sheet continue to improve and its loan losses continue to decline.

Fifth Third Bancorp (FITB) is a diversified financial company that operates in four segments: Commercial Banking, Branch Banking, Consumer Lending, Investment Advisors. The stock has coverage from 22 analysts with 12 strong buys, 2 moderate buys, 7 holds, and 1 strong sell. The one year price target for the stock is $14.67, which I believe is attainable; however, its success will depend on the direction of the markets. The stock is 124% more volatile than the market which means its price has the ability to post large gains and large losses in short periods of time.

The company itself has a strong balance sheet with very little debt compared to its assets, and consistently increases income year-over-year. However, the company's sales are slow to gain which I believe is a result of the company being more careful with its loans. The company has shown improvements in loan quality which mean the company is choosing to give loans more efficiently. I believe the stock is headed in the right direction and is returning capital to its shareholders with a 33% increase in its quarterly dividend. But with slow sales and extreme volatility, the stock will be dependent on the market's direction, which I believe will see gains over the next year as the economy attempts to recover.

Huntington Bancshares (HBAN) is a diversified holding company that provides full-service consumer and commercial banking services. The bank is the smallest of the 3, however, I believe it operates the most efficiently. The company has both a solid income statement and balance sheet with year-over-year gains in earnings along with very little debt. I believe the company's financial improvements are a result of it having fewer loans written off, and a low percentage of delinquent loans compared to others within the industry.

The company has a high price to book ratio of nearly 0.90 which usually indicates a low percentage of bad loans. The company has 17 analysts that ranked the stock with 9 strong buys, 7 holds, and 1 strong sell. The one year price target is $6.95 which is less than the company's 52 week high of $7.70. I believe the company will exceed its target price as it continues to operate more efficiently by making good decisions and consistently improving its income.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HBAN over the next 72 hours.

Additional disclosure: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.