Monday, October 19, 2009

Regional Banks: A Look at the Stock Market Laggards

I took a look at the sector performance page for the Barchart site, which tracks the relative stock market performance of a wide range of industry and sector groups. It was eye-opening to see what has been strong and what has been going wrong as investments this past year.

Among the top ten performance groups are gold mining stocks, precious metal and jewelry companies, non-ferrous mining shares, silver mining firms, and integrated oil companies. All commodity related. Additionally among the top ten were food, flour, and grain firms and paper and related products companies--also commodity related.

So what are the lagging sectors?

The bottom ten in performance include regional banks, southwest region banks, savings and loan companies, northeast region banks, southeast region banks, midwest region banks, and western region banks.

In other words, even as some large banks have flourished in the bailout era, many regional banks are languishing. I found 59 listed regional banks and S&L institutions that are still down more than 50% year to date, despite the stock market rally. Sixteen of these are down more than 70% year to date. Far and away the region with the greatest number of banks with weak stock performance was the southeast.

One wonders how these local and regional banking institutions will finance an economic recovery if they themselves are ailing. Little wonder the FDIC is in the red and looking for funding from prepayment of bank fees. The list of problem banks is 416, with actual bank failures now nearing the 100 mark.