3 Regional Bank Stock Best Bets From KBW

NEW YORK (TheStreet) -- KBW on Wednesday raised its price targets for three regional banks that carry "Outperform" ratings, with improved mortgage banking as the main theme for the first quarter.

Following KBW's universal banks first-quarter earnings preview, the firm on Wednesday published its preview for regional banks, which included a number of upward earnings estimate revisions, with implied upside from "early signs of macro-economic improvement and real estate recovery in distressed regions, in particular in the Southeast," with "less incremental impact" for banks in less-stressed regions.

With banks still facing a threat to their net interest margins -- the difference between the average yield on loans and investments and the average cost for deposits and wholesale borrowings -- in the prolonged low-rate environment, KBW said that "earnings contraction" could disappoint investors with "overly optimistic expectations."