One trend common to all the economic recoveries I have covered is that, early on, local and regional banks do better than big money-center ones.
That's because local banks tend to focus on local customers, and often get their pick of the litter at this point in the cycle. Mid-sized companies make good customers at this stage of the cycle, they're growing through the heart of their sales curves, and before they're lost to Wall Street due to their growing requirements they make for good business, trading at or near book value.
It's late in the cycle, when these good customers become thinner on the ground, where the desire for growth replaces the fear of loss, and where regional bankers start believing their own hype that things go the other way. Local and regional banks are usually the ones who collapse in a crash.
So the growing strength of regional banks like Huntington Bancshares (HBAN), Regions Financial (RF) and Synovus Financial (SNV) is telling us that we're still in the early innings of this economic recovery. That, plus there's a chance your favorite regional may be taken out by a larger bank as things move along.
My own favorite in this group has been Prosperity Bank (PB), a Texas bank that wasn't as badly hurt by the real estate crash as others because state law there keeps homes from being taken in bankruptcy. My reasons for favoring this bank are personal - it's where my wife's family lives.
But this may still give you the hint of a strategy. Check out your local market for the bank you think is doing things right, and if they are offering a good deal for your cash chances are their stock is doing well, too. If that's too much work for you, the regional banks ETF, KBWR (KBWR) , may be the way to go.
Over the next few weeks expect many articles talking about regional banks and their prospects. Take a look at their numbers, and evaluate what's written. But right now, at this stage of the cycle, the best advice is probably to shop locally and trust what you see more than what any analyst says.
Additional disclosure: As noted I own 100 shares of Prosperity Bank (PRSP) which for some reason isn't listed here at SA.