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The iShares Dow Jones U.S. Regional Banks ETF (NYSEARCA:IAT) is down over 60% since inception in early 2007, mostly on account of the impact of the 2008-09 financial crisis on the U.S. economy. While the ETF has recovered, up over 80% since the lows in early 2009, it continues to remain weak as the U.S. and world economies struggle, the housing market remains weak, loan defaults continue, and the unemployment remains high. Meanwhile, banks have deleveraged since the crisis, and are more stable, thereby positioning them well for rising profitability once the U.S. economy improves.

In this article, via an analysis of the investing activities of the world largest fund managers, managing between $100 billion and over a trillion dollars, in regional and super-regional banking stocks, we aim to identify the ones that these mega fund managers are most bullish and bearish about. The list includes prominent managers such as Wellington Management ($1.6 trillion in total assets under management), Vanguard Group ($1.4 trillion), Fidelity Investments ($640 billion), T Rowe Price ($330 billion), and Goldman Sachs Asset Management ($580 billion), among others.

The regional banks are defined as those that operate in one region of the U.S., in contrast to money center banks, which operate nationally and globally. Super-regional banks are defined as those regional banks that have a significant presence across multiple states in a geographical region, but are still much smaller in scale and reach that national and global Banks.

Overall, there are almost 400 publicly traded regional and super-regional banks in the U.S., with the Northeast and Southeast regions having over a quarter each due to their large population base, and the Midwest having the smallest proportion at about 15%. They provide banking services such as deposits; loans, leases, mortgages, and credit cards; ATM networks; securities brokerage; investment banking; insurance sales; and mutual funds and pension funds management.

We determined based on our analysis that mega fund managers are bearish on the regional and super-regional banks. During the June quarter, these mega fund managers together cut a net $2.37 billion from their $76.07 billion prior quarter position in the group, selling $6.93 billion and buying $4.56 billion worth of stocks in the group.

The following is the only regional bank that these mega fund managers are bullish about (see table):

Huntington Bancshares Inc. (NASDAQ:HBAN): HBAN operates as the holding company for the Huntington National Bank that provides commercial and consumer banking services via 611 offices in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, Kentucky and Florida. Mega funds added a net $22 million to their $1.59 billion prior quarter position, and taken together, mega funds hold 35.7% of the outstanding shares, significantly more than their 28.6% weighting in the regional banking group. The top buyers were Royal Bank of Canada ($43 million), Fidelity Investments ($15 million) and Neuberger Berman Group ($12 million); and the top holders were Fidelity Investments ($439 million), Vanguard Group ($220 million) and State Street Corp. ($209 million). Overall, 419 institutions hold 68.3% of HBAN shares, with Fidelity, Vanguard and State Street being the top holders with 10.1%, 5.0% and 4.3% of the outstanding shares, respectively.

The following are the regional banks that these mega fund managers are most bearish about (see table):

US Bancorp (NYSE:USB): USB is a super-regional financial services holding company, providing various banking and financial services via 3,482 branches in 24 mid-western and western states. Mega funds cut a net $1.09 billion from their $14.33 billion prior quarter position, and taken together, mega funds hold 27.3% of the outstanding shares, almost at par with their 28.6% weighting in the regional banking group. The top sellers were Capital World Investors ($791 million) and Goldman Sachs Asset Management ($314 million). Overall, 973 institutions hold 68.5% of USB shares, with T Rowe Price ($1.86 billion), State Street Corp. ($1.86 billion), Vanguard Group ($1.84 billion) and Berkshire Hathaway (NYSE:BRK.A) ($1.77 billion) being the top holders with 3.8%, 3.8%, 3.7% and 3.6% of the outstanding shares, respectively.

BB&T Corp. (NYSE:BBT): BBT operates as a financial holding company for Branch Banking and Trust Company, which provides banking and trust services to individuals and businesses via 1,782 offices in 12 states and Washington, D.C. Mega funds cut a net $140 million from their $4.69 billion prior quarter position, and taken together, mega funds hold 27.9% of the outstanding shares, almost at par with their 28.6% weighting in the regional banking group. The top sellers were AllianceBernstein ($400 million) and JP Morgan Chase & Co. ($108 million). Overall, 558 institutions hold 56.1% of BBT shares, with State Street Corp. ($628 million) and Vanguard Group ($616 million) being the top holders with 3.8% and 3.7% of the outstanding shares, respectively.

Regions Financial Corp. (NYSE:RF): RF is a holding company for the Regions Bank that provides a range of commercial, retail, and mortgage banking services in the U.S. via 1,772 offices in 16 states in the South and the Midwest. Mega funds cut a net $187 million from their $1.79 billion prior quarter position, and taken together mega funds hold 32.2% of the outstanding shares, significantly higher than their 28.6% weighting in the regional banking group. The top sellers were Fidelity Investments ($164 million) and JP Morgan Chase & Co. ($62 million). Overall, 455 institutions hold 68.8% of RF shares, with Fairholme Capital Management ($494 million), Fidelity Investments ($255 million) and Vanguard Group ($253 million) being the top holders with 9.8%, 5.1% and 5.0% of the outstanding shares, respectively.

Fifth Third Bancorp (NASDAQ:FITB): FITB operates as a diversified financial services’ holding company, engaged in commercial, retail and trust banking, data processing services, investment advisory services and leasing activities via 1,312 centers in 12 states. Mega funds cut a net $86 million from their $3.12 billion prior quarter position, and taken together mega funds hold 27.5% of the outstanding shares, almost at par with their 28.6% weighting in the regional banking group. The top sellers were Goldman Sachs Asset Management ($128 million) and Ameriprise Financial ($43 million). Overall, 570 institutions hold 76.2% of FITB shares, with State Street Corp. ($453 million) and Vanguard Group ($412 million) being the top holders with 4.1% and 3.7% of the outstanding shares, respectively.

KeyCorp (NYSE:KEY): KEY operates as a holding company for KeyBank National Association, which provides various investment management, retail and commercial banking, consumer finance, and investment banking products to corporate, individual and institutional clients via 1,033 branches in 14 states. Mega funds cut a net $18 million from their $1.89 billion prior quarter position, and taken together, mega funds hold 27.0% of the outstanding shares, almost at par with their 28.6% weighting in the regional banking group. The top seller was Fidelity Investments ($34 million). Overall, 538 institutions hold 80.4% of KEY shares, with Vanguard Group ($376 million), State Street Corp. ($315 million) and Fidelity Investments ($288 million) being the top holders with 5.4%, 4.5% and 4.1% of the outstanding share,s respectively.

SunTrust Banks Inc. (NYSE:STI): STI operates as the holding company for SunTrust Bank, which provides traditional deposit and credit services as well as trust and investment services via 1,668 offices in Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia and Washington, D.C. Mega funds cut a net $344 million from their $3.79 billion prior quarter position, and taken together, mega funds hold 33.0% of the outstanding shares, significantly higher than their 28.6% weighting in the regional banking group. The top sellers were Goldman Sachs Asset Management ($277 million) and Fidelity Investments ($83 million). Overall, 535 institutions hold 71.1% of STI shares, with Paulson & Co. ($637 million), T Rowe Price ($456 million) and State Street Corp. ($426 million) being the top holders with 6.0%, 4.3% and 4.0% of the outstanding shares, respectively.

General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Regional Bank Picks Of The World's Largest Fund Managers