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

[Cigarbutt]

8 hours ago, gfp said:

What's amazing in that last chart is how little bank reserves the system "needed" until recently, when all of a sudden QE apparently pushed a ton of un-needed bank reserves into the system by swapping one interest bearing government liability for another.  Now the Fed has this balance sheet where they own long dated paper in an inverted yield curve environment and they are increasing the stimulus into the economy by running the Fed at a loss (paying net interest into the economy).  Just another example of the Fed having it totally backwards and stimulating while they say they are trying to tighten...

The Fed's programs have gotten to be very large and (not unlike the Florida insurance market (!) as discussed elsewhere) they now have to deal with many priorities (liquidity, solvency, stability) including affordability (moral hazard risk) which may involve contradictory stances (some of the stuff they do (simultaneously) eases and some others tighten). For a while, the Fed has embarked on a scheme of doing more and more. It's interesting to note that since mid-2022, the Fed has started to unwind its balance sheet but has only reduced their assets by less than 10% at this point, a process which, on its own, would have had about a zero effect on interest rates so in order to artificially raise rates, the Fed has had to pay interest on excess reserves. That didn't matter when rates were near the zero bound but now the Fed's largesse has become a high contributor to commercial banks' return on assets.

i appreciate your opinion about the 'stimulation' part but it appears (opinion) that, on a net basis, the Fed has been tightening overall. An aspect that supports that is the correlated trend in commercial banks' tightening of credit in general:

Anyways, that's what USB had to say on the matter:

Federal Reserve Focuses Monetary Policy on Fighting Inflation | U.S. Bank (usbank.com)

Edited September 12, 2023 by Cigarbutt
minor spelling mistakes

[Spekulatius]

Well, the current monetary regime with the inverted yield curve is certainly tightening for the banks, but not for the average person with some assets.

Edited September 12, 2023 by Spekulatius

[gfp]

Well I agree that QE and QT had almost zero effect on interest rates. The Fed‘s own studies showed the same - a few basis points, maybe, in theory.  It’s not just the net interest (losses) paid by the Fed into the private sector that is stimulating.  The much larger factor is the increase in the interest component of deficit spending into the private sector. Such a large portion of the debt is short term, as there is enormous demand for the most useful collateral in the world - US Treasury Bills.  Fed hikes increase deficit spending, stimulating the private sector, but only the folks that are flush.  Uncle Warren might have skipped the PPP for optics but he’s the real beneficiary of the current policy.

 

deficit spending is the ultimate stimulus. Much more potent than conventional monetary policy 

[UK]

https://www.bloomberg.com/news/articles/2023-09-11/kyle-bass-says-us-banks-to-lose-250-billion-in-office-holdings#xj4y7vzkg

[Gamecock-YT]

Here come the layoffs:

 

 

https://ir.truist.com/download/Barclays+Global+Financial+Services+Conference+2023.pdf

 

Sept 11 (Reuters) - Truist Financial (TFC.N) is planning "sizable reductions" to its workforce over the next few months to save roughly $300 million in costs and said the bank's revenue for the current quarter was likely to be in line with its expectations.

 

The layoffs, part of a larger cost savings program, will be underway from the current quarter to the first quarter of 2024, Truist said in a presentation to investors on Monday, sending shares 2% higher in mid-morning trading.

[Cigarbutt]

On 9/11/2023 at 8:19 PM, Spekulatius said:

Well, the current monetary regime with the inverted yield curve is certainly tightening for the banks, but not for the average person with some assets.

Well, the "current" regime (whatever it has been and evolving into for the last 25 years) has been easy for the average person with some assets.

Then what do i tell three members of my growing clan (who have burgeoning earning power and growing intent of buying assets, housing, securities and otherwise) when they wonder about prices of assets versus general levels of earning power?

Then, in a stoic way, what do i tell them when it's being shown that the post-Covid tightening phase induced by the Fed has been (at least temporarily) tempered by the ultimate fiscal stimulus?

i recently watched:

Watch MADOFF: The Monster of Wall Street | Netflix Official Site

The short series leaves a lot to desire in terms of art in the making but still is quite fascinating in some respect. For example, the semi-documentary shows that the principal character always had, deep inside his psyche, the Ponzi potential. And it took a while to figure out even in retrospect. A key revelation (opinion) is that the biography of the man shows what can happen when insufficient restraints are in place.

-----

Any relevance to investing?

In the distant past, Fairfax used to have this macro mean-reversion risk-aversion mentality and, more recently, this has cost them a fair bit. But they no longer carry this unreported asset and this has prevented me to go all-in, wise decision?

-----)

Back to regional banks, any relevance?

Like JPM complains these days, it (eventual mean reversion) may mean requirements to hold more capital and to operate with more constraints, eventually? when?

 

[Spekulatius]

USB down ~4% today. I did not see any news, except an unchanged dividend. I think USB used to raise their dividend in the third quarter almost every year and this year they apparently didn't. Maybe that has spooked the market, or is there anything else going on?

 

Even $C has raised this year and so did $BAC. $PNC, $JPM.

[sleepydragon]

26 minutes ago, Spekulatius said:

USB down ~4% today. I did not see any news, except an unchanged dividend. I think USB used to raise their dividend in the third quarter almost every year and this year they apparently didn't. Maybe that has spooked the market, or is there anything else going on?

 

Even $C has raised this year and so did $BAC. $PNC, $JPM.

https://ibn.fm/pyDl8

 

[gfp]

So my local bank, HancockWhitney emailed out an 11-month CD offer at 5.4% this morning.  I realize that's where the market is for CDs and this isn't exceptional but it's not exactly an encouraging sign that they are clamoring for 5.4% deposits.  Then I read this article in the journal that JPM (of all places!) is offering 6% on $5 million min. on 6-month CDs!  Why does JPM want 6% deposits?  Just to expand relationships at the private bank?

 

I guess if deposits are fleeing the private bank to T-bills they can offer this to try to match the after-tax return of a t-bill for someone who would pay state income tax on bank interest but not t-bill income.

 

https://www.wsj.com/finance/banking/jpmorgan-6-percent-cd-fe862850?mod=hp_lead_pos2

 

Also, if the banking crisis is behind us - why hasn't the BTFP balance declined at all?  Instead it keeps going up...

https://fred.stlouisfed.org/series/H41RESPPALDKNWW

Edited September 28, 2023 by gfp

[Cigarbutt]

On 9/28/2023 at 9:32 AM, gfp said:

...

Also, if the banking crisis is behind us - why hasn't the BTFP balance declined at all?  Instead it keeps going up...

https://fred.stlouisfed.org/series/H41RESPPALDKNWW

Well the unrealized losses from the interest rate exposure hasn't improved in Q3 (!) and the interesting feature of the BTFP is the sterilization of such losses so. There are still a huge amount of excess uninsured deposits sloshing around.

There is no direct link between those unrealized losses and supply appetite for loans and leases but there is a link:

There is no point in arguing cause and effect (banks tightening standards, yield curve inversion etc) and there seems to me more than transitory unrealized positions' discomfort in explaining the slow grind of higher funding costs, including when banks turn to the markets for debt:

[CanadianMunger]

Royal Bank of Canada injects cash into US subsiduary:

 

https://finance.yahoo.com/news/2-rbc-pumps-capital-californian-154026168.html

[weighingmachine]

many of these listed here have preferreds priced under par and paying 7-8% yields

[lnofeisone]

3 hours ago, weighingmachine said:

many of these listed here have preferreds priced under par and paying 7-8% yields

Are there any names you are tracking that pay 7-8% yields? I periodically scan preferreds here and only seeing a handful that are in the 7-8% and most of them look meh (much smaller with OK BS) compared to MTB, TFC, etc. of the bankworld. 

[weighingmachine]

USB A trading at $768 and paying 8.8%
MTB-H trading at $22 and paying 6.2%
TFC-R and TFC-O trading at $18 and $21 and yielding 6.4% and 6.2%    

A whole bunch north of 6% yields with double digit percent discounts to liquidation preference. Some smaller ones like KeyCorp, Associated Bancorp, Synovus paying north fo 7% still.

[sleepydragon]

https://www.greenwichtime.com/business/article/m-and-t-bank-deposits-people-s-united-18386779.php?cmpid=fbsocialflow&fbclid=IwAR0REhrJD8R_kKLxPPKJ1OyL49aIN6qYQTYhxr1nJL3aHvj4ZCGW8iQ_zhE_aem_AehEO6xY7w2Ap0N3vFpra99cqVoYFC39dGB5k7R1L-0muhcJKkEgOrZnS1p0gSRd_H4&mibextid=Zxz2cZ

 

 

[formthirteen]

Bill Gross was a bit bullish on bonds yesterday, now he's two days away from being bullish on regional banks:

 

 

Quote

Current situation resembles the axiom of “catching a falling knife.” It hurts if done too early. I’m waiting a few more days but they are great long term holds.

 

I've tried catching falling bonds unsuccessfully during the last few months and regional banks earlier this year. Bailed out with some blood on my hands. I know I shouldn't try to catch these things.

 

Quote

“If your stock goes down 10% and that upsets you, it obviously means you think the market knows more about the company than you do. And, in that case, you’re the patsy. If it goes down 10% and you want to buy more because you know the business is worth just as much as when you bought it before — or perhaps a little bit more with the passage of time — so you buy more, [then] they’re the patsy.”

- Warren Buffett

 

Edited October 25, 2023 by formthirteen

[UK]

https://www.bloomberg.com/news/articles/2023-10-27/bank-stocks-sink-past-svb-crisis-lows-as-rates-upend-business

[Sweet]

Crazy moves today in many of the regional and even big bank names.  Bill Gross thinks this is the bottom - not sure on that but would be nice to see it.

[TwoCitiesCapital]

Last I checked the system was still losing fairly significant deposits - just at a slower clip. Until rates drop, or deposits equalize, id expect you're still going to have trouble here. 

 

The recent rally is probably just the inversion of the yield curve, but it's still not steep enough for banks to really make profits or offset the negative carry of their book of business from 2020-2022. 

[Sweet]

Regionals got slammed across the board today.  Not liking what Powell had to say.

[dcollon]

It has more with what NYCB had to say 

[Sweet]

32 minutes ago, dcollon said:

It has more with what NYCB had to say 

Didn’t see that news. 

[schin]

7 hours ago, dcollon said:

It has more with what NYCB had to say 

 

Are mid-size/regional banks even worth investing in? I mean.... Size matters in the US with regulations. See how the large banks powered through the pandemic, Ukraine/Russia fiascos, etc.... Just the cost of AML/KYC and IT investments -- and oversight.... regional banks don't have the scale... They do serve a local customer.. but, you don't get better P/BV in regional. Higher growth... They're just weener.. just stuck in the middle. With a middle of the road strategy.

 

You can buy Citi/BAC/WFC at better PBV multiples, better dividend payout, and growth than regionals.  Plus Citi/BAC/WFC are too big to fail.. so, they get more scrutiny in their business model.

[thowed]

2 hours ago, schin said:

 

Are mid-size/regional banks even worth investing in?

 

I don't think you can generalise.  I'm no expert, but I think SOME are.  But it requires researching - something so much easier to do with internet resources and people like Nate @oddballstocks and team.

[schin]

6 hours ago, thowed said:

 

I don't think you can generalise.  I'm no expert, but I think SOME are.  But it requires researching - something so much easier to do with internet resources and people like Nate @oddballstocks and team.

 

I would love the counterargument or an example of a good regional to invest in that is undervalued like Citigroup or even an international global bank like Deutsche Bank, Barclays, Unicredit, BNParabis, Commerzbank, ABN Amro.  (I just listed 6 banks that priced below book and with stronger CET1 ratios) 

 

Just feel the dynamics the large money center bank is easier... There is definitely finish in the smaller pond of regional banks.... but, I think it's easier now for the larger banks.

Edited February 1 by schin