US Regional bank stocks - PNC Financial, TFS - Truist, USB- USB Bank, MTB - M&T Bank etc

[Dalal.Holdings]

 

Our regulators are incompetent and don’t understand the concept of Reflexivity.
 

They are essentially broadcasting with a megaphone that anyone who wants to buy a U.S. bank will get a helluva deal in receivership. Is there any wonder why TD got out of the FHN deal? They can pick up a U.S. bank at the FDIC’s fire sale soon !

 

This kind of stuff will get more banks killed.

Edited May 6, 2023 by Dalal.Holdings

[TwoCitiesCapital]

9 minutes ago, Dalal.Holdings said:

 

Our regulators are incompetent and don’t understand the concept of Reflexivity. This kind of stuff will get more banks killed.

 

On the flip side, there is no longer incentive to step in and buy banks and their troubled assets BEFORE they fail due to the arrangement that was made for First Republic and the FDIC eating $13B of losses on that before flipping to JPM 24 hours later. 

 

They've got to do something? But maybe that something should have been nothing. Should've let the first several fail and then come up with exceptional relief. 

[Dalal.Holdings]

18 minutes ago, TwoCitiesCapital said:

 

On the flip side, there is no longer incentive to step in and buy banks and their troubled assets BEFORE they fail due to the arrangement that was made for First Republic and the FDIC eating $13B of losses on that before flipping to JPM 24 hours later. 

 

They've got to do something? But maybe that something should have been nothing. Should've let the first several fail and then come up with exceptional relief. 

That’s my point—why would any would-be buyer want to buy a bank alive anymore ? They get such a good deal on dead banks…

 

This will cause equity/debt of these banks to get discounted which hampers ability to raise capital and reflexively increases probability of failure. 
 

That’s why PACW suggesting a sale caused the stock to crash.

 

The feds have no idea what harm they are causing…

[CorpRaider]

Can I just say that I don't follow this "two clicks to a bank run = new world" stuff?  Even from the big guy.   Bank of Internet USA was founded in the year 2000. 

Edited May 9, 2023 by CorpRaider

[treasurehunt]

6 hours ago, CorpRaider said:

Can I just say that I don't follow this "two clicks to a bank run = new world" stuff?  Even from the big guy.   Bank of Internet USA was founded in the year 2000. 

I guess he was saying that online banking is much more common now than even a few years back. Here's a relevant excerpt from the recently published Financial Stability Report from the Fed. You can find the complete report at https://www.federalreserve.gov/publications/financial-stability-report.htm.

 

"The runs on SVB and Signature Bank were of unprecedented speed compared with previous runs. During the run on Washington Mutual in 2008—to date, the run that caused the largest failure of an insured depository institution by inflation-adjusted total assets—depositors withdrew about $17 billion over the course of eight business days, with the largest deposit withdrawal in one day reaching just over 2 percent of pre-run deposits. By comparison, the highest one-day withdrawal rate was more than 20 percent in the case of SVB and Signature Bank, at the time the second- and third-largest depository institutions by inflation-adjusted total assets, respectively, that failed due to a bank run (figure B). At SVB, withdrawals would have been even larger had regulators not closed the bank on the morning of March 10."

[Spekulatius]

The increased speed in withdrawals in bank run scenarios is absolutely real and represent a real risk for banks and a challenge for risk management. Good management teams take the possibility of a bank run into account and have backup liquidity in terms of FHLB lines or take time deposits etc.

 

I think in aggregate, it makes deposit franchises less valuable.

[Dalal.Holdings]

Quote

First Citizens BancShares Inc.’s deposits surpassed estimates following its rescue deal for Silicon Valley Bank after a run on deposits wiped out that lender. 

 

The bank said deposits were $140.05 billion for the first three months of the year, beating analyst estimates of $119 billion. The SVB acquisition added a $9.82 billion preliminary gain to First Citizens’ net income and contributed $65 million of its $850 million in net interest income for the quarter, it said in a statement.

 

FCNCA is now up about 51% YTD. Compare that to all other bank stocks.

 

Tell me how the FDIC receivership sale process isn't a total giveaway to bank buyers...

[CorpRaider]

11 hours ago, treasurehunt said:

I guess he was saying that online banking is much more common now than even a few years back. Here's a relevant excerpt from the recently published Financial Stability Report from the Fed. You can find the complete report at https://www.federalreserve.gov/publications/financial-stability-report.htm.

 

"The runs on SVB and Signature Bank were of unprecedented speed compared with previous runs. During the run on Washington Mutual in 2008—to date, the run that caused the largest failure of an insured depository institution by inflation-adjusted total assets—depositors withdrew about $17 billion over the course of eight business days, with the largest deposit withdrawal in one day reaching just over 2 percent of pre-run deposits. By comparison, the highest one-day withdrawal rate was more than 20 percent in the case of SVB and Signature Bank, at the time the second- and third-largest depository institutions by inflation-adjusted total assets, respectively, that failed due to a bank run (figure B). At SVB, withdrawals would have been even larger had regulators not closed the bank on the morning of March 10."

Thank you.  I'll check it out.  I don't know anything about signature.  It seems to me like it would be just as easy to stall/slow with an online only presence; just give the "sorry timed out high demand" page like Fidelity does 3 or 4 times a quarter.  Social media does seem to increase virality of narratives and panics.  I have never liked big business/investment banking and HNW deposit bases. 

Edited May 10, 2023 by CorpRaider

[backtothebeach]

Taking bank robbery to a whole different level

 

https://www.reuters.com/markets/deals/first-citizens-bancshares-records-98-bln-gain-silicon-valley-bank-purchase-2023-05-10/

[Dalal.Holdings]

1 hour ago, backtothebeach said:

Taking bank robbery to a whole different level

 

https://www.reuters.com/markets/deals/first-citizens-bancshares-records-98-bln-gain-silicon-valley-bank-purchase-2023-05-10/

https://www.bloomberg.com/opinion/articles/2023-05-10/companies-are-allowed-to-do-bad-mergers

 

Matt Levine wrote about this--his take is that for a bank to purchase assets/liabilities from the FDIC, purchased Assets - Liabilities must yield a significantly positive number (equity value) so that the bank doing the purchasing does not end up poorly capitalized.

 

While that might be a valid take, there is no reason the gap needed to be that large as to generate immediate large boost to earnings/etc for these banks (I mean look at their stock prices since the deals were announced...). Furthermore, instead of giving away such "free equity" to these banks, FDIC should have gotten something in return--maybe preferred stock ? USG took preferred positions in banks during GFC.

 

Levine also says that purchaser needs to get positive equity from these deals because otherwise the banking system would remain poorly capitalized....but guess what? The FDIC's losses will be an equivalent cost to the banking system in the form of assessments anyway so I don't see how it spares the banking system of taking the loss. The loss is just spread across the FDIC members...

 

 

Edited May 10, 2023 by Dalal.Holdings

[Gregmal]

While not a fan of this sort of stuff, if screaming rumors is all it takes to decimate a stock I think it’s probably wise to look at a short selling ban. Seemed pretty cut and dry that everything was stable and then a rumor about exploring a sale pops up and deposits flee. Definitely not a healthy situation. 

[crs223]

How exactly do I quickly get my funds out of my bank using the website?

 

Can you guys “wire” funds from the website?  (I cannot)

 

I can perform an ACH… but AFAIK that is technically the same as writing a check (which i can do without internet).

[Spekulatius]

1 hour ago, crs223 said:

How exactly do I quickly get my funds out of my bank using the website?

 

Can you guys “wire” funds from the website?  (I cannot)

 

I can perform an ACH… but AFAIK that is technically the same as writing a check (which i can do without internet).

With some banks, you can wire online through their website. My credit union has this functionality for example.

[crs223]

1 minute ago, Spekulatius said:

With some banks, you can wire online through their website. My credit union has this functionality for example.

 

Wow, I didn’t know that was possible.  This capability would definitely speed up a bank run.  Only time I’ve ever wired money was to buy a house.  Seems dangerous for the customer and for the bank to allow online wires:

 

Isn’t a wire irreversible even in cases of fraud/theft?  If i gain access to your account (eg password phishing) could I wire all your money away to Nigeria — with no recourse?

 

I disabled Zelle because there was no recourse even in cases of fraud.

 

I believe a stolen/washed check (and ACH) could be reversed after an investigation.

[Malmqky]

21 minutes ago, crs223 said:

 

Wow, I didn’t know that was possible.  This capability would definitely speed up a bank run.  Only time I’ve ever wired money was to buy a house.  Seems dangerous for the customer and for the bank to allow online wires:

 

Isn’t a wire irreversible even in cases of fraud/theft?  If i gain access to your account (eg password phishing) could I wire all your money away to Nigeria — with no recourse?

 

I disabled Zelle because there was no recourse even in cases of fraud.

 

I believe a stolen/washed check (and ACH) could be reversed after an investigation.

The customer takes on liability for the wire - they provide instructions to the FI. The FI just does as they’re instructed.

Edited May 11, 2023 by Malmqky

[Spekulatius]

23 minutes ago, Malmqky said:

The customer takes on liability for the wire - they provide instructions to the FI. The FI just does as they’re instructed.

For my particular credit union, a bank employee checks the data that I put in online and you need to confirm after a review, so it will take a few hours to a wire done.

This is really no different than teller and get everything done offline, imo.

[Malmqky]

10 minutes ago, Spekulatius said:

For my particular credit union, a bank employee checks the data that I put in online and you need to confirm after a review, so it will take a few hours to a wire done.

This is really no different than teller and get everything done offline, imo.

I was typing out a response, but realized you’re talking about fraud as in someone hacking your online banking and wiring money, not someone wiring to a scammer. My bad!

Edited May 11, 2023 by Malmqky

[Spekulatius]

Who would have thought? Cayman island deposits from US banks  -  in this case SVB - are not covered by the FDIC.

https://www.wsj.com/articles/the-pain-of-silicon-valley-banks-collapse-is-being-felt-by-these-depositors-f18c0bd4?siteid=yhoof2

 

I am fairly sure the Cayman Island deposits were not part of the  FDIC mutual insurance assessment either.

Edited May 14, 2023 by Spekulatius

[Dalal.Holdings]

12 hours ago, Spekulatius said:

Who would have thought? Cayman island deposits from US banks  -  in this case SVB - are not covered by the FDIC.

https://www.wsj.com/articles/the-pain-of-silicon-valley-banks-collapse-is-being-felt-by-these-depositors-f18c0bd4?siteid=yhoof2

 

I am fairly sure the Cayman Island deposits were not part of the  FDIC mutual insurance assessment either.

 

Quote

The challenge for SVB’s foreign depositors, however, is that they also don’t rank ahead of bondholders and other creditors in a liquidation scenario.

 

wow

[Xerxes]

https://twitter.com/4Mischief/status/1658640031395770368?t=uisCvxeBQOzzjzW7gp7jng&s=08
 

 

[John Hjorth]

On 5/11/2023 at 4:14 PM, Gregmal said:

While not a fan of this sort of stuff, if screaming rumors is all it takes to decimate a stock I think it’s probably wise to look at a short selling ban. Seemed pretty cut and dry that everything was stable and then a rumor about exploring a sale pops up and deposits flee. Definitely not a healthy situation. 

 

@Gregmal,

 

I personally follow and agree with your thinking and stance about shortsellers taking advantage of others misfortunes by malpractice involving i.e. Main Stream Media and  / or Social Media.

 

Jamie Dimon has been all over the place lately, here as an example :

 

Business Insider - Markets [May 12^th 2023] : JPMorgan CEO Jamie Dimon wants US regulators to consider a ban on the short selling of bank stocks.

 

Then I also listen to this :

 

CNBC [May 11^th 2023] : Jamie Dimon says short-sellers on social media are to blame for banking crisis.

 

So it's complicated.

 

The total number of US banks has been going down since approx. 1970 or so, so US banking has more or less been in consolidation mode for about 5 decades. Based on my knowledge about European banking, I think it's actually a similar evolution / trend here in Europe, too.

 

Perhaps - and alone therefore - regional US banks under a certain size thereby simply don't have a future long term as separate and independent legal entities.

 

I can't see any way to give all banks same conditions as the GSIBs for deposits, because they - the regional banks - can't handle the regulatory burden that rests on the shoulders of the GSIBs. The GSIBs would protest fiercely, if that - same regulatory burdens for all - was not part of such package. It's the problem of finding a balance with regard to giving equal terms and conditions of existence to high and low in an regulated industry, that favours none of both in the industry.

 

Perhaps that problem does not have a solution.

Also :

 

FDIC - Banks - Data

Edited May 20, 2023 by John Hjorth

[Spekulatius]

Europe has a lot of state or local government own institutions. Think Raiffeisen, Sparkassen which is where most individuals bank. Sparkassen have an institution in every larger town, then a separate one for each district and layer on top of this Landesbanken. These banks do create a lot of competition and lower margins than in some countries where banking is more consolidated (Ireland, maybe UK even).

 

I think France is fairly centralized (because they like to centralized and regions tended to have very little autonomy as all roads lead to Paris in France.

 

The US for a long time regulated banking and limited the amount of branches a bank could have or interstate banking. This led to many banks and only the key deregulation in 1980 (signed by Carter) started to change that. So so 1980 deregulation really kicked of the competition and consolidation in banking in the US, and that will continue. that’s not necessarily bad for bank investor either, because banks do tend to get taken out at a premiums. My guess is that we will get to less than 50 banks in the US eventually (one for every state roughly) but probably not in my lifetime.

 

Huge banks like BAC with investment banking, international operations and huge hedge books should be treated different than a run of the mill $5B bank that mostly operates in one or two states with 50 branches. BAC can really take the financial system down while the other one can’t.

[Ulti]

good interview 

[Cigarbutt]

There are secular forces behind lower valuations allocated to smaller banks that are unrelated to the recent ‘liquidity’ issues and, contrary to areas like commodities (lower relative valuations), it is likely that this tendency for low valuations of smaller banks (unless a niche player of some kind) will persist and even accentuate.

An interesting aspect is that capital (deposit) movements occurred from a rather select group of banks (unusual interest rate risk, high uninsured deposit ratios, “super-regional” category) to other depository institutions, mostly perceived as ‘safe’ (or too big to fail) and smaller and more regional banks of the main street-type did not feel to liquidity unease.

Bank Funding during the Current Monetary Policy Tightening Cycle - Liberty Street Economics (newyorkfed.org)

 

A fascinating aspect is that deposits are still plentiful at banks despite some marginal systemic tightening and, since 2008, deposit growth is no longer tied to run-of-the-mill loan growth, deposit growth at commercial banks is mostly tied to quantitative easing/tightening and the level of securities held by commercial banks (when banks buy a security, including government debt, they do create money with the associated creation of a deposit through balance sheet expansion). This is nicely shown in the following graph (found in a note written by John Hussman, someone who is sometimes rightly criticized but also someone who simply puts ideas out there for the world to think about).

 

What is even more fascinating is that people who write, comment and opine on the web about ‘excess money’ don’t seem to see the ‘excess’ savings as a mirror image of the government-sponsored (Fed-Treasury alliance) MMT-like money creation scheme.

 

Before the last two recessions, ‘savings’ would simply align with ‘loans’ but after the GFC and, especially, after the great virus crisis, ‘excess’ savings is mostly money that governments ended up creating.

The Rise and Fall of Pandemic Excess Savings | San Francisco Fed (frbsf.org)

 

The podcast with Sheila Bair (someone who deserves respect IMHO) is interesting but her theory that there was a deposit flight from banks to MMFs and then to the O/N RR window is not significantly supported by data as deposits mostly remained within commercial banks (it is ironic that there is a publicity about a yield ETF during the podcast; when someone puts a deposit into this ETF, where does the money go? The money certainly does not stay there because money held by the ETF earns 0% and not the yield they are advertising!). However Sheila Bair is on to something when she describes the potential need for banks to build more capital…eventually…because, in a way, the Fed is ending up these days with a balance sheet (negative equity really) that is looking similar to recently challenged banks as a result of poor duration risk management. Of course, the Fed can print money, somehow or even technically, but it’s been the expectation of commercial banks that the Fed will come to their rescue whenever needed and this moral hazard is bound to…eventually, mean higher capital requirements (and lower returns on equity) for banks. At least, in terms of risk management (historically US style), banks are not supposed to fall back on excessive and permanent Fed support but are supposed to fall forward (some banks may need temporary support at times). At least that’s what famous financier Denzel Washington suggested in 2011.

Edited May 25, 2023 by Cigarbutt
spelling

[Sweet]

https://www.marketwatch.com/story/regional-bank-crisis-may-be-far-from-over-experts-warn-2b793d95?mod=home-page

 

 

 

Nice chart showing the maturity of outstanding debt.

 

All else being equal I’d imagine that those banks with more short term loans are likely to be safer because they aren’t locked into long maturity low rate debt?

 

For me CMA stands out as being interesting.