For Immediate Release

Chicago, IL – May 4, 2011 – Today, Zacks Equity Research discusses the U.S. Banks Industry, including SunTrust Banks, Inc. (STI - Analyst Report), KeyCorp (KEY - Analyst Report) and Financial Institutions Inc. (FISI - Snapshot Report).

A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/52523/U.S.+Banks+Industry+Outlook+-+May+2011.

After enduring overwhelming recessionary shocks, the U.S. banking industry is now slowly recovering. 2010 can be certainly characterized as a year of reform. Financial support from the U.S. government ultimately transformed to comparative stability during the year.

The government had taken several steps, including programs offering capital injections and debt guarantees, to stabilize the financial system. Also, the banks are working hard to address problem credit, primarily in residential and commercial real estate. However, the industry is still grappling with weak revenue, ebbing loan demand and low liquidity challenges.

After more than two and half years of initiating the Troubled Asset Relief Program (TARP), a lot has improved with respect to the economic crisis. Also, looking back at the calculation released by the Treasury in March, TARP will finally earn about $23.6 billion by 2013. Considering the effectiveness in easing credit and capital market pressure, restoring confidence in the financial system, and recovering the injected money at a lower-than-expected cost, it can be concluded that the government’s highly criticized bailout program has finally turned out to be a winner.

Out of the total $700 billion bailout money, about $245 billion was handed out to banks in 2008. With repayments by SunTrust Banks, Inc. (STI - Analyst Report), KeyCorp (KEY - Analyst Report) and Financial Institutions Inc. (FISI - Snapshot Report) in March, taxpayers have recovered a total of $251 billion from bailed out banks, realizing profit of about $6 billion. This recovery includes dividends and interest income from banks.

However, more than $20 billion is still due from over 550 institutions. Once these institutions reimburse, profits from the bank bailout will increase even more.

With more banks releasing reserves, we expect provision for loan losses to continue declining at least till the end of 2011. Also, the problems with small banks might end up under the wing of bigger institutions.

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.

Macroeconomic Headwinds

There are several macroeconomic factors that may cave in the profitability of the U.S. banks.

Among others, the quantitative easing policy (QE2) of the Federal Reserve is expected to significantly reduce long-term rates, which will keep net interest margins under pressure.

Though the financial reform law signed by President Obama in 2010 empowers the government to tighten regulations for companies that could jeopardize the economy, these may pose threats to profitability for the country's biggest banks in the near- to mid-term. Many restrictions under the law related to proprietary trading and interchange fees are the most notable among such risks.

Then again, while the implementation of Basel III will boost minimum capital standards, there will be a short-term negative impact on the financials of U.S. banks as they will have to adjust their liquidity management process.

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