Following KBW’s universal banks first-quarter earnings preview, the firm on Wednesday published its preview for regional banks, which included a number of upward earnings estimate revisions, with implied upside from “early signs of macro-economic improvement and real estate recovery in distressed regions, in particular in the Southeast,” with “less incremental impact” for banks in less-stressed regions. With banks still facing a threat to their net interest margins — the difference between the average yield on loans and investments and the average cost for deposits and wholesale borrowings — in the prolonged low-rate environment, KBW said that “earnings contraction” could disappoint investors with “overly optimistic expectations.” Looking at the three banks that KBW rates “Outperform,” for which the firm raised price targets on Wednesday, there is an interesting contrast for long-term investors who have strong confidence in the unfolding U.S. economic recovery. These three banks trade for at least 1.4 times tangible book ... … Read entire article »