More Fantastic News for Banks

Before you go, we thought you'd like these...
Before you go close icon

US Bancorp (NYS: USB) and PNC (NYS: PNC) both reported earnings today, and the news was a whopper.

Earnings were up 39% at US Bancorp as credit quality continues to improve and provisions dropped. PNC's earnings fell 43% due to higher foreclosure costs and a one-time gain during the comparison period last year.

But for me, the big news continues to be strong loan growth in traditional banking.

Yesterday, we saw Citigroup(NYSE: C) and Wells Fargo(NYSE: WFC) actually report loan growth. Today, we found out that US Bancorp's lending rose nearly 6% and that PNC's book grew 3%.

Why does this matter so much? The big worry for commercial banks has been with their revenue. With a slow-growing economy, overleveraged households, and falling long-term interest rates, banks' sources of income have been drying up.

While interest margins remain tight and PNC's revenue did decline this quarter, the fact that loan growth remains strong is great news for the economy and the Dow (INDEX: ^DJI) -- especially its cyclical components. Positive economic news, particularly in employment and manufacturing, has been the big driver of the market's gains this year.

As for banking, the loan growth trend is a strong sign for national banks like US Bancorp and PNC that are much more focused on commercial banking than their too-big-to-fail counterparts. If cheap banks are able to continue growing their loan books in this credit-tight environment, that removes one of the big worries hanging over their heads.

If you're looking for a few names to cash in on the trend that's shaping up, I'll point you to my colleague Anand Chokkavelu's banking picks. He details them in our brand new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to grab a free copy by clicking here.

At the time this article was published Ilan Moscovitz owns shares of US Bancorp. The Motley Fool owns shares of Citigroup, Wells Fargo, and PNC Financial Services Group. The Fool owns shares of and has created a covered strangle position on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners