Here is the latest on the U.S. Banks sector:

It was recently reported that U.S. credit card delinquencies rose to a record high in February and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Further, the banks will also continue to take mark-downs in the investment portfolios, further hurting the bottom-line.

We currently do not see any opportunities and thus do not have a Buy recommendation on any stocks within this industry.

The banks with high exposure to housing and Commercial Real Estate loans like Wilmington Trust Corporation (WL), KeyCorp (KEY) and Comerica (CMA) will continue to remain under pressure.

We also maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions through FY09.

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