US Regional Banks Profit Disappoint, But Shrs Rise

By Tim McLaughlin

NEW YORK (Reuters) - Four large U.S. regional banks reported disappointing quarterly results on Tuesday as they set aside more money to cover escalating mortgage problems.

Investors, however, looked past their large build-up of reserves for growing loan losses, lifting bank shares more than 10 percent in some cases.

The Philadelphia KBW Bank Index .BKX rose 3.3 percent, but is off 34 percent since reaching an all-time high in February 2007.

In Ohio, National City Corp (NCC.N: Quote, Profile, Research, Stock Buzz) recorded a big loss, while Fifth Third Bancorp (FITB.O: Quote, Profile, Research, Stock Buzz) and KeyCorp (KEY.N: Quote, Profile, Research, Stock Buzz) reported that their profits evaporated in the fourth quarter.

Lending to people with weak credit has rocked U.S. banks of all sizes as defaults on risky subprime loans rise, sapping the U.S. economy and rattling financial markets worldwide.

The three large banks in Ohio -- a key state in the upcoming U.S. presidential election -- turned in financial results that demonstrated how weakness in the housing market is forcing banks to curtail or tighten lending in some sectors.

Cleveland-based National City lost $333 million in the fourth quarter, compared with a year-ago profit of $842 million.

"There is still an atmosphere in the capital markets of discomfort," National City Chief Executive Peter Raskind said. "Investors are having difficulty assessing where the bottom is -- as it relates to the housing market -- and all the follow-on effects. The wheels are not yet turning smoothly. They are turning with a high degree of creakiness."