U.S. regional banks are competing harder for commercial lending and may cut more jobs after leaning on a drop in credit costs to improve earnings.
"We're getting to the point where there's not a lot left to speak of," R. Scott Siefers, an analyst at Sandler O'Neill & Partners LP, said of the lenders' ability to continue reducing provisions for soured loans to bolster profit. Headcount reductions are the most efficient way to cut costs as they account for about half of a bank's expenses, he said.
Third-quarter revenue at four of the five biggest regional lenders — Regions Financial Corp., PNC Financial Services Group Inc., BB&T Corp. and SunTrust Banks Inc. — dropped about a combined 5 percent. Revenue may hold steady or decline for the next two years if interest rates fail to rebound, said Brian Foran, an analyst at Nomura Holdings Inc. in New York.
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