Even though some financial institutions are ready, willing and able to return the funds received through the Troubled-Asset Relief Program (TARP), the sticking point remains what the government is willing to accept and what the financial institutions are willing to pay for the warrants attached to the preferred stock. While financial institutions have experienced a rebound over the recent couple of months, we note there are still a number of concerns that will continue to overhang the industry for a number of quarters: Unemployment continues to remain extremely high, to within about a half a percent of the 10% level, as such the delinquency rates on prime loan home mortgages has increased. The 1Q09 moratorium on home foreclosures has been lifted and the level of new foreclosures has started to rise again. Consumer loan delinquencies have been on the rise. Commercial loan issues have been on the risk. While ...

While the financial markets and financial institutions in particular have received a lift in recent days, until there is a quality plan to get the financial institutions back on the lending track, this may amount to a bit of irrational exuberance.

Our banking system remains in a fairly frozen state. Financial institutions remain afraid of the potential for additional losses, continue their anaconda grip on lending only exacerbates the problem.

A financial institution's true willingness to lend remains only to "qualified" home buyers. Clearly, the definition of "qualified" has changed dramatically over the past year to mean "pristine credit," or a FICO credit score of 750 or better out of a 300-850 range.

As credit score requirements continue to be ratcheted higher, additional hurdles have been added, though the credit scoring agencies continue to have excessive errors in their data. More times than not, these errors can only be addressed by paying for

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Highlighted stocks include Huntington Bancshares Inc. (HBAN), MGIC Investment Corporation (MTG) and MBIA Inc. (MBI). Even though it appears that financial institutions have moved ahead with respect to the unfreezing of our banking system, they remain reluctant to lend. With financial institutions afraid of the potential of additional losses, their current Anaconda grip on lending only exacerbates the problem. While we continue to see financial institutions advertise their willingness to lend, the hook remains, "qualified" home buyers. Clearly, the definition of "qualified" has changed dramatically over the past year to mean "pristine credit". As credit score requirements continue to be ratcheted higher, additional hurdles have been added. Credit card client "profiling", with respect to their shopping habits, has increased. So by example, you previously shopped at a gourmet grocer and now it's predominately at a Super Target or Wal-Mart. Even though the

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We sat down recently with Zacks senior banking & financial analyst Neena Mishra in order to try to get a sense of when we might be seeing a bottom for financial companies – if indeed we’re not seeing one currently.

Understandably, you’ve got several Sell-rated stocks in your coverage. Can you tell us about one of your most-recently published Sell reports?

After reviewing the results of Zions Bancorporation (ZION), we have lowered our EPS estimates, based on our concerns for further credit deterioration and dilutive effect of the proposed capital raise. We are maintaining our Sell recommendation on the shares of ZION with a six-month target price of $22.00 per share.

This assessment came post-quarterly earnings results?

Yes. ZION’s 2Q08 operating earnings of $0.66 per diluted share were substantially below our estimate as well as consensus. The earnings for the quarter were mostly impacted by the sharp increase in provisions, coupled

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