Although Northeast and Mid-Atlantic regional banks came through the recession with fewer balance sheet and credit wounds than their Southern counterparts, they were unable to escape the regulatory uncertainty that currently plagues the entire banking industry.
“I think the one thing we are really tracking closely right now is what’s going to happen with the Office of Thrift Supervision because that is a primary regulator for the majority of the companies operating in the mutual holding company structure,” said Mike Shafir, a senior research analyst at Sterne, Agee & Leach. Shafir is almost certain regulatory capital levels will be pushed higher, although beyond that, he’s shy to guess at what other regulatory changes might be.
“I think what we are looking to is where capital level requirements are going to be moving forward. Certainly, while things are not official, they are going to be moving higher, in our opinion,” he said. “And you can see that a lot of institutions are bracing themselves for that and are transforming their balance sheets accordingly, whether it be taking advantage of the move upwards in the market to raise capital, to either go on the offensive or just to bolster their balance sheets.”
Currently Shafir’s favorite stock picks are include the following partially public companies: Beneficial Mutual (BNCL) and Third Federal Financial (TFSL), among others.
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