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LowIQinvestor

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11 minutes ago, CorpRaider said:

@Spekulatius  You're referencing Cathay?  That's the California kind of Chinese-American dominant bank?

Ah ha!  My first co-owner of CATY!  CATY was written up in Outstanding Investor Digest in 1994 and it was beyond incredible to read.  The bank was earning almost 20% on equity selling for book value.  There were earthquakes, recessions, fires, OJ riots, etc. knocking stuff all down and around.

 

All while the east coast banks, small banks, were earning 10% of equity and selling for 2.5 to 5 times book value based on Eddie Klutzfield (Crutchfield) being willing to pay up and flush all the equity and expenses down in a one-time charge such that "I can pay 5 times book and make it all work out."  So Eddie at First Union went through 20 years of no book value growth (those flushes...ya know) and eventually was "earning"  (fake earnings, fake ROE) 30% on equity (there wasn't any equity).

 

Ole Buffett once said, "Librarians read financial statments; investors need to know what the figures mean."  30% on equity for First Union was just 30% on evaporation.  

Edited by dealraker
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5 hours ago, Spekulatius said:

@dipod - what is your take at $ZION. they also got a bunch of AFS securities and moved a large bunch to HTM ( yellow flag). They also have seen a huge bump in deposits in 2020 and have seen some of them disspear. the bank is very cheap, if they can hold on to their security portfolio and they seem to have very low cost deposits, but there are definitely reasons why some investors are concerned, based on a preliminary look.

 

Edit - i just saw that they also drawn ~$10B from federal funds already, so they are definitly liquidity constraint. those Federal funds loans are quite expensive and might lead to negative carry relative to their securities.

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@SpekulatiusBought as part of a basket of banks. There's risk there but the price is just too cheap to ignore. Of all the banks, it's my smallest position. Bulk is in BAC, WFC, and C. 

Edited by dipod
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2 hours ago, dealraker said:

Ah ha!  My first co-owner of CATY!  CATY was written up in Outstanding Investor Digest in 1994 and it was beyond incredible to read.  The bank was earning almost 20% on equity selling for book value.  There were earthquakes, recessions, fires, OJ riots, etc. knocking stuff all down and around.

 

All while the east coast banks, small banks, were earning 10% of equity and selling for 2.5 to 5 times book value based on Eddie Klutzfield (Crutchfield) being willing to pay up and flush all the equity and expenses down in a one-time charge such that "I can pay 5 times book and make it all work out."  So Eddie at First Union went through 20 years of no book value growth (those flushes...ya know) and eventually was "earning"  (fake earnings, fake ROE) 30% on equity (there wasn't any equity).

 

Ole Buffett once said, "Librarians read financial statments; investors need to know what the figures mean."  30% on equity for First Union was just 30% on evaporation.  

Anyone looked at BAnk of Hawaii? Mostly Japanese American depositors , I think

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26 minutes ago, sleepydragon said:

Anyone looked at BAnk of Hawaii? Mostly Japanese American depositors , I think

 

Looked at Bank of Hawaii this morning.  Most regional banks leverage increased in the last few years.  There are only a handful operating at less than 10 times asset to equity leverage.  Most have crept up to 13-18 times.  Leverage is a killer for financial institutions during outlier events.  I think there is more pain to come for the banking industry as rates haven't topped out and contagion fears spread.  Cheers!

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2 hours ago, Intelligent_Investor said:

IDFB at low $11s

 

How likely do you think the deal close is? Particularly with respect to timing.

 

The other deal I am tracking is TD Bank/First Horizon which is delayed due to regulators dragging their feet:

https://www.commercialappeal.com/story/money/business/2023/02/10/td-bank-first-horizon-merger-delayed-regulatory-approval/69891953007/#:~:text=First Horizon and Toronto-Dominion,27%2C 2023.

 

 

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2 hours ago, sleepydragon said:

Anyone looked at BAnk of Hawaii? Mostly Japanese American depositors , I think

To me BOH looks pretty safe. They do have a large security portfolio as well  - ~$8.3B with ~$1.3B in equity. this looks scary, but BOH has a very stable deposit base because there is very limited competition in Hawaii.

 

I think they will be fine. They have traded at premium valuation because the lack of competition has enabled above average ROE with very low risk lending.

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Edited by Spekulatius
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