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Stock Strategist Industry Reports

Regional Banking Is Back

A few regional banks are set to rise from the rubble as winners of this banking crisis.

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Warren Buffett once quipped that when the tide goes out, you discover who has been swimming naked. At first glance, the banking sector now looks like a nudist beach. But if you look closer, you'll discover that a few regional banks didn't forget to put on their swimsuits.

Regional Banks, Securitizations, and Subprime Lending
Regional banking was always a competitive field, but its fortunes took a negative turn a few decades ago with the surge of securitizations. Gradually old-school regional bankers found themselves competing with investors in the multi-trillion-dollar fixed-income market and their enablers on Wall Street. The regional banker who used to personally know his borrowers and manually underwrite loans had no chance against the Street's well-oiled sales machine that was both flush with cash and ready to gobble up anything that it could package as a security and resell to yield-hungry investors.

Michael Kon has a position in the following securities mentioned above: BBX. Find out about Morningstar’s editorial policies.