American International Group, Fannie Mae, Freddie Mac and Commerce Bancshares

CHICAGO--([ BUSINESS WIRE ])--Today, Zacks Equity Research discusses the U.S. Banks Industry, including American International Group (NYSE: [ AIG ]), Fannie Mae (NYSE: [ FNM ]), Freddie Mac (NYSE: [ FRE ]) and Commerce Bancshares Inc. (Nasdaq: [ CBSH ]).

A synopsis of todaya�s Industry Outlook is presented below. The full article can be read at [ http://www.zacks.com/stock/news/34418/U.S.+Banks+Stock+Update+-+May+2010 ].

While the economy is in a recovery phase, a lot remains to be done. The Treasury continues to hold huge direct investments in institutions like American International Group (NYSE: [ AIG ]), Fannie Mae (NYSE: [ FNM ]) and Freddie Mac (NYSE: [ FRE ]).

Additionally, rating agency Standard & Poor's said in March 2010 that it is maintaining its negative outlook for the U.S. banking industry based on FDICa�s industry financial performance data as of the end of 2009. The agency expects credit losses in the loan books of banks to be on the upside. Further, the agency warned that the pressure on ratings has not yet fully eased.

In conclusion, we expect loan losses on commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans. Also, as a result of a rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions at least in the near term, affecting their profitability. We think that the financial crisis is far from over, and it will be awhile before we can write the end to this crisis story.

We favor Commerce Bancshares Inc. (Nasdaq: [ CBSH ]) in this space since this company is one of the few names that did not report losses even during the current financial crisis. We believe that Commerce is one of the best-capitalized banks in the industry and will generate positive earnings throughout the credit cycle. While the bank had a decent growth in deposits in the most recent quarter, trends in its credit metrics were negative.

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American International Group, Fannie Mae, Freddie Mac and Commerce Bancshares