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

[gfp]

23 minutes ago, Sweet said:

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.

 

Not sure if you are totally getting this chart, but this is maturities of debt owed by the regional banks, not the loans on their books.  CMA would be the one on the chart with the most debt coming due this year, not the one with the shortest maturity loan book.

[Spekulatius]

26 minutes ago, Sweet said:

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.

This chart pertains to bank debt not bank assets. Having LT and fixed interest rate debt is an advantage now for a bank.

Edited May 28, 2023 by Spekulatius

[Sweet]

@gfp @Spekulatius thanks both.  Yes I misinterpreted that - it completely changes the analysis lol.

Edited May 28, 2023 by Sweet

[Sweet]

From Marketwatch:

 

“In a bid to shore up the system after this year’s banking crisis, U.S. regulators are planning fresh rules that will force bigger banks to lift their capital requirements by an average 20%, The Wall Street Journal reported on Monday, citing sources. Any bank that relies on income from fees may also be swept up, in the first of a series of tougher rules en route for the industry. Regulators want banks to measure their loss-absorbing risk buffers on a more transparent and globally comparable basis. The Federal Reserve is spearheading the effort to boost requirements, alongside the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, with all three expected to seek comment on the proposals, followed by a vote and a few years for implementation. As part of the changes, some midsize banks will no longer be allowed to mark losses on securities held, which is a factor blamed on SVB’s collapse.”

 

https://www.marketwatch.com/story/u-s-banks-may-need-to-raise-capital-requirements-by-20-wsj-6f8d4e06?mod=home-page

 

How does that affect the likes of Citi, BAC, WF and JPM?  Seems the bigger banks are the targets.

[Spekulatius]

@Sweet WSJ article:

https://www.wsj.com/articles/big-banks-could-face-20-boost-to-capital-requirements-c68c1e1b?mod=hp_lead_pos2
 

Sounds to me that the main targets will be banks with trading business and banks from $100B to $250B in size . Then there is the treatment of AOCI losses that may apply to all banks (HTM bucket).

 

Personally, I think they need to increase the risk weighing for treasuries based on duration.

[gfp]

Raising bank capital requirements at the onset of an already-underway credit crunch.  What could go wrong?

[Spekulatius]

50 minutes ago, gfp said:

Raising bank capital requirements at the onset of an already-underway credit crunch.  What could go wrong?

Any change in bank regulation is several years out. It's wont affect the current situation.

[Ulti]

An excellent podcast with bankers from Raymond James … one of whom is a whole loan trader…. They discuss all things current in banking/ cre and future crapola 

[gfp]

Thanks for sharing Ulti - great podcast and these guys are seeing things the same as I am.  Didn't hear them worry about "inflation" a single time and one made a special point to clarify that he was talking about "deflation" and not just "disinflation."  Bank credit is money.  This sucker is tightening up.

 

John Toohig has an excellent free newsletter on LinkedIn that is worth following if you like this perspective.

https://www.linkedin.com/pulse/lets-talk-loans-vol-55-john-toohig/?trackingId=S4dHMbY3Qa%2BKC296MBGTlw%3D%3D

Edited June 10, 2023 by gfp

[Ulti]

Great interview 

[Spekulatius]

4 hours ago, Ulti said:

Great interview 

Listening to this is like taking an ice cold shower. These guys are pretty bearish.

I do agree that the banking issues cause a credit tightening but by how much is unclear to me.

[Ulti]

18 minutes ago, Spekulatius said:

Listening to this is like taking an ice cold shower. These guys are pretty bearish.

I do agree that the banking issues cause a credit tightening but by how much is unclear to me.

To me ,the ice cold shower was the almost robotic culture of the fed, as well as the general ineptitude of our political class..Kaplan

made some rational suggestions, including giving local and state governments

more time to organize and spend federal money. After the latest fed and their

regulators f'ups, I can only hope that they handle future banking issues better.

[dealraker]

40 minutes ago, Spekulatius said:

Listening to this is like taking an ice cold shower. These guys are pretty bearish.

I do agree that the banking issues cause a credit tightening but by how much is unclear to me.

So Spek...at some point in 2011 the lumber company which I am a shareholder of (a small one that I bought from family wanting to exit decades ago) owned Tractor Supply.  We owned it because my cousin who is one of the two controlling shareholders had bought it.  He manages the investments for that company, which is from selling the other lumber supply businesses decades ago.  

 

But anyway, we had a banker "expert" come give us some economic forecasts, yet another cousin who was big in the banking business thought highly of the guy, and he talked us "down" from our belief in Tractor Supply.  So there we were, guys all over the buiding busness as to experience, guys who had been in the hardware business prior to Lowe's coming to town, and we knew that Tractor Supply was literally killing it in the areas where they chose to compete.

 

Yet we sold our stock, LOL!  The banker guy?  Not many of us have paid much attention to him for a while now, but he's still out and about with his economic forecasts.  And we?  Well, I think we bought some more Berkshire or something, so we haven't exactly lost our money.  But...

 

For us little guys, and we are all little with tons of options, isn't there better stuff to listen to?  I will listen to the guys today in the podcast as I drive to town and back.  Life is just too complex for me!

 

Just a story, but one to take note of.  

Edited June 13, 2023 by dealraker

[Ulti]

5 minutes ago, dealraker said:

For us little guys, and we are all little with tons of options, isn't there better stuff to listen to? 

I dunno Deal..... I liked listening to Kaplan because he is succinct ( not to wonkish ) ,work experience, and has an interesting take.....Do  I sell EWBC based on his bearish forecasting of the future of regional banking; No. ( and thanks for the suggestion ). As I get older,I'm becoming more skeptical of experts in finance and investing... but I drive around and listen to them because I'm curious and its better than listening to my 18 year old's music ..haha

[Spekulatius]

28 minutes ago, Ulti said:

To me ,the ice cold shower was the almost robotic culture of the fed, as well as the general ineptitude of our political class..Kaplan

made some rational suggestions, including giving local and state governments

more time to organize and spend federal money. After the latest fed and their

regulators f'ups, I can only hope that they handle future banking issues better.

It is what it is. We need to live and invest in the environment we have, not the one we want. Ranting about interest rates, the Fed etc does not change the interest rates or what the Fed does.

 

Maybe a low value post but I think it helps with the peace of mind. #Stoicism.

 

I think my only takeaway is not to chase regional banks stocks, but I wouldn't sell anything either.

[Ulti]

2 minutes ago, Spekulatius said:

#Stoicism.

Agree

[gfp]

1 hour ago, Spekulatius said:

Listening to this is like taking an ice cold shower. These guys are pretty bearish.

I do agree that the banking issues cause a credit tightening but by how much is unclear to me.

 

I feel like you are commenting on the podcast with the Raymond James whole loan guys, not the Kalpan interview.  The Kaplan interview reads like Wabuffo / Warren Mosler / MMT - which is not bearish at all.  

 

[Spekulatius]

8 minutes ago, gfp said:

 

I feel like you are commenting on the podcast with the Raymond James whole loan guys, not the Kalpan interview.  The Kaplan interview reads like Wabuffo / Warren Mosler / MMT - which is not bearish at all.  

 

Yes, I mixed up the two. I was referring to the Raymond James podcast about banking. Thx for clarifying.

[wabuffo]

I only listened to the beginning of the interview and then kinda gave up.  The issue is that banks generate deposits when they originate a loan BUT NOT when they buy it from someone else.   Part of the reason I quit the interview is that both subjects kept saying banks need to obtain deposits before they can lend. (which makes sense in this market of wholesale loans but not in the origination of loans) That's a red flag for me that perhaps they either misspoke (or I misheard them) or they may not grasp how the plumbing actually works.

 

The subject of the interview sells whole loans from one bank to another.  So in an environment like this, I think banks prioritize origination of loans vs buying them at wholesale.   This is why for example, you are seeing some banks exiting indirect auto lending (bank buys the auto loan rather than originates it) even as overall auto lending/origination/securitization is pretty strong.

 

We came from an environment where banks were overflowing with deposits and had the balance sheet capacity to buy loans during the pandemic.

 

Perhaps I'm being nit-picky here.   Is this a sign of lending contraction?  Or maybe this interview might overstate the specific niche of this area of banking as representative of overall credit extension at the moment. 

 

Just my 2-cents and I could be wrong.

 

Bill

 

 

Edited June 13, 2023 by wabuffo

[Gamecock-YT]

3 hours ago, Ulti said:

I dunno Deal..... I liked listening to Kaplan because he is succinct ( not to wonkish ) ,work experience, and has an interesting take.....Do  I sell EWBC based on his bearish forecasting of the future of regional banking; No. ( and thanks for the suggestion ). As I get older,I'm becoming more skeptical of experts in finance and investing... but I drive around and listen to them because I'm curious and its better than listening to my 18 year old's music ..haha

beauty of leaving the finance industry and the day-to-day coming and goings is you realize so so SOOOO much of news is just idle banter in order to fill a broadcast, newspaper, etc. it’s all noise. 
 

much better to be in your own thoughts and stick to your little niches. Then just wait.

 

im currently waiting while on a cruise going through the Norwegian fjords. Logged on to my brokerage account once in the past 7-8 days? 
 

someone let me know when the market blows up.

[Ulti]

3 hours ago, Gamecock-YT said:

 

 

im currently waiting while on a cruise going through the Norwegian fjords. Logged on to my brokerage account once in the past 7-8 days? 
 

someone let me know when the market blows up

Likewise …. Getting ready to do 10 days backcountry in Yosemite…can’t wait 

[crs223]

11 hours ago, wabuffo said:

This is why for example, you are seeing some banks exiting indirect auto lending (bank buys the auto loan rather than originates it)

 

I once got a loan from Toyota to buy a car.  the loan was “immediately” issued through Wells Fargo.  I doubt Toyota of Springfield originated the loan and immediately sold it to WFC.

 

I assumed this is what the podcast was talking about.

[crs223]

On 6/10/2023 at 1:00 PM, gfp said:

Didn't hear them worry about "inflation" a single time

 

this is true but also keep in mind these guys had an agenda: if the fed lowers rates (due to waning inflation or otherwise), the banks will get a “boost”.

[wabuffo]

I once got a loan from Toyota to buy a car.  the loan was “immediately” issued through Wells Fargo.  I doubt Toyota of Springfield originated the loan and immediately sold it to WFC.

 

As a matter of fact, the Toyota of Springfield probably did originate the loan through Toyota's finance subsidiary -- Toyota Motor Credit Corporation (10-K here):

 

https://www.sec.gov/ix?doc=/Archives/edgar/data/834071/000095017023026012/ck0000834071-20230331.htm

 

Your loan is technically called a retail installment sales contract and is financed by TMCC on behalf of the dealership.  It's why its called an indirect loan or finance receivable.

 

Continuing through this process, Toyota Motor Credit Corporation then probably packages your loan in one of its Toyota Auto Receivables Trusts like this one:

https://www.sec.gov/Archives/edgar/data/1131131/000092963817000824/a71121_424h.htm

 

The servicer of this Trust is Wells Fargo who services these installment contracts and is the "face" to the borrower in terms of payment of principal and interest.   Wells Fargo does not own the loan of course, they merely service it and administer the securitization trust.

 

Its one long sequence of lend-recycle capital-lend-recycle-capital-lend where pieces of your auto loan are held by the asset-backed security holders of the Toyota Auto Receivables Trust. 

Financial innovation and risk management at its finest!

 

Perhaps your situation was different but the process I'm laying out is pretty standard for the industry.

 

Bill

 

Edited June 14, 2023 by wabuffo

[crs223]

2 hours ago, wabuffo said:

I once got a loan from Toyota to buy a car.  the loan was “immediately” issued through Wells Fargo.  I doubt Toyota of Springfield originated the loan and immediately sold it to WFC.

 

As a matter of fact, the Toyota of Springfield probably did originate the loan through Toyota's finance subsidiary -- Toyota Motor Credit Corporation (10-K here):

 

https://www.sec.gov/ix?doc=/Archives/edgar/data/834071/000095017023026012/ck0000834071-20230331.htm

 

Your loan is technically called a retail installment sales contract and is financed by TMCC on behalf of the dealership.  It's why its called an indirect loan or finance receivable.

 

Continuing through this process, Toyota Motor Credit Corporation then probably packages your loan in one of its Toyota Auto Receivables Trusts like this one:

https://www.sec.gov/Archives/edgar/data/1131131/000092963817000824/a71121_424h.htm

 

The servicer of this Trust is Wells Fargo who services these installment contracts and is the "face" to the borrower in terms of payment of principal and interest.   Wells Fargo does not own the loan of course, they merely service it and administer the securitization trust.

 

Perhaps your situation was different but the process I'm laying out is pretty standard for the industry.

 

Bill

 

 

I need to stick to my day job writing software… thanks Bill!