"Green sprouts" of revenue growth for smaller banks

|By:, SA News Editor

"We have seen a better economy, we saw better credit growth, but now we are seeing better loan growth," says KBW's Jeff Harralson, bullish on the regional and community banking sectors (KRE, KBWR). "We're seeing the first hints of banks beginning to raise the loan rates ... very positive for their earnings."

Regionals are generally considered those with less than $50B in assets, community banks are those with less than $10B.

Dick Bove agrees, with Regions Financial (RF), SunTrust (STI), and BB&T (BBT) his favorites in the sector..

"It's a credit recovery story that finally turned the corner," says RayJay's Michael Rose, noting United Community Banks (UCBI) of northern Georgia as one with credit issues but room to grow.

Don't forget M&A activity, adds Harralson, noting both PacWest Bancorp (PACW) and CapitalSource (CSE) jumped on the day of their merger announcement. Others that might benefit from deals are SCBT Financial (SCBT) of South Carolina and Prosperity Bancshares (PB) of Houston.