Zacks Industry Outlook Highlights: Metrocorp Bancshares, Texas Capital BancShares, Viewpoint Financial Group, S&T Bancorp and Sterling Bancorp

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Jan 13, 2012, 09:30 ET

CHICAGO, Jan. 13, 2012 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Banks, including Metrocorp Bancshares Inc. (Nasdaq: MCBI), Texas Capital BancShares Inc. (Nasdaq: TCBI), Viewpoint Financial Group (Nasdaq: VPFG), S&T Bancorp Inc. (Nasdaq: STBA) and Sterling Bancorp (NYSE: STL).

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A synopsis of today's Industry Outlook is presented below. The full article can be read at

http://www.zacks.com/stock/news/67721/U.S.+Banks+Stock+Outlook+-+Jan.+2012

While the financials of a few large banks have been stabilizing on the back of an economic recovery, the industry is still on shaky ground. Nagging issues like depressed home prices along with still-high loan defaults and unemployment levels continue to trouble such institutions.

Lingering economic uncertainly and its effects also continue to weigh on many banks. The need to absorb bad loans offered during the credit explosion has made these banks susceptible to severe problems.

Furthermore, government efforts have not succeeded in restoring lending activity at the banks. Lower lending will continue to hurt margins, though the low interest rate environment should be beneficial to banks with a liability-sensitive balance sheet.

Increasing loan losses on commercial real estate could trigger hundreds of bank failures in the upcoming years. However, the worst appears to be over and the pace of bank failures is expected to be slower. Considering the course of failure last year, the number of bank failures in 2012 is not expected to exceed the 2011 tally.

Eventually, the strong banks will continue to take advantage of strategic opportunities, with the big fish eating the little ones.

Conclusion

Clearly, the banking system is not yet out of the woods, as there are several nagging issues that need to be addressed by the government before shifting the strategy to growth. We believe that the U.S. economy will regain its growth momentum once these are resolved.

However, before the banking sector regains investors' confidence, it is likely to meet several disappointments on the way that would offset positive developments.

OPPORTUNITIES

The regulatory requirement of focusing on banking institutions toward higher-quality capital will help banks absorb big losses. Though this would somewhat limit the profitability of banks, a proper implementation would bring stability to the overall sector and hopefully keep bank failures in check.

Specific banks that we like with a Zacks #1 Rank (short-term Strong Buy rating) include Metrocorp Bancshares Inc. (Nasdaq: MCBI), Texas Capital BancShares Inc. (Nasdaq: TCBI), Viewpoint Financial Group (Nasdaq: VPFG), S&T Bancorp Inc. (Nasdaq: STBA), Sterling Bancorp (NYSE: STL), among others.

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