Proof that most stock analyst reports are suitable as bird cage liner and little else

[TC Talks]

Here goes First Republic

First Republic stock plunged by nearly half on Tuesday after the bank reported weak earnings a day earlier and detailed the extent of a depositor exodus last month that left it hobbled.

The bank’s shares sank more than 49 percent Tuesday, the day after First Republic reported weak first-quarter results and revealed that depositors pulled out $102 billion in the first three months of 2023. Chief executive Michael J. Roffler said the company planned to cut as much as 25 percent of its workforce as the bank seeks to reduce its loan volume and “nonessential projects and activities.”

[moldyoldie]

Here goes First Republic

First Republic stock plunged by nearly half on Tuesday after the bank reported weak earnings a day earlier and detailed the extent of a depositor exodus last month that left it hobbled.

The bank’s shares sank more than 49 percent Tuesday, the day after First Republic reported weak first-quarter results and revealed that depositors pulled out $102 billion in the first three months of 2023. Chief executive Michael J. Roffler said the company planned to cut as much as 25 percent of its workforce as the bank seeks to reduce its loan volume and “nonessential projects and activities.”

Meanwhile, the entire regional bank sector took a two percent dump in sympathy. I see this as a buying opportunity. My bank, Huntington Bank (HBAN), recently reported a rise in quarter-to-quarter deposits while beating analysts' earnings estimates. They've maintained a diversified loan portfolio with stringent qualifications, as well as hedging their investment portfolio in the face of rising interest rates and pressure on net interest margins.

FWIW, Comerica Bank is on a nationwide "watch list" and its stock price reflects it.

Huntington and other regional banks are now offering 5% CDs for the first time in many years -- good for savers, bad for bank profits. Competition with T-Bills and money market funds is good for those wanting the FDIC insurance at your local bank.

[TC Talks]

Huntington has always been a bit more conservative on the lending side than other regionals and they have moved into #2 behind Chase. I wonder how 5/3 is doing.

Commerica went from owning Michigan to a 5th ranked player in Dallas when they moved. I honestly think they aren't much of a player in Michigan outside certain automotive circles, which places them in third.

As of June 30 (2022) of this year, the five largest banks operating in the region — JPMorgan Chase, Huntington, Comerica, Bank of America and PNC — held more than 80 percent of the market share in Southeast Michigan, and had $167 billion in deposits.

By comparison, the 10 largest banks operating in the region that are headquartered in Michigan had just 9 percent market share and about $19 billion in deposits, according to FDIC data.

Fifth Third hasn't recovered from the Silicon Valley scare. I wonder if they have seen a mass exodus of depositors.

[moldyoldie]

Huntington has always been a bit more conservative on the lending side than other regionals....

Well, not always. Huntington's poorly timed acquisition of Sky Financial, a somewhat liberal lender, immediately prior to the financial crisis of 2008 brought with it a boatload of trouble. In the crisis' aftermath, the bank's Board of Directors named Steve Steinour as president, CEO, and chairman. Mr. Steinhour instituted the bank's current conservative stance toward lending with an emphasis on customer service and community involvement. Anecdotally, I know of a few folks who were denied loans at Huntington. I myself was initially denied a Huntington Visa card until it was recently offered to me. Huntington is often described by analysts as "solid"...whatever that means.

As to the emphasis on customer service, I can tell you that on the rare occasion I need to walk into a branch, there's always someone to say, "Welcome to Huntington Bank." I also find it unusual that the employees, for the most part, wear Huntington uniforms of some sort.
It should be noted that Huntington is the nation's leader in originating Small Business Administration (SBA) loans.

Like most traditional brick & mortar banks Huntington pays squat on a regular savings account, but their no fees, no minimum, no frills checking account is an attractive draw for me as I'm sure it is for many; it's a good source of interest-free deposits. They do offer other type savings, checking, and money market accounts, but with minimums I personally find onerous.

[Comerica] went from owning Michigan to a 5th ranked player in Dallas when they moved. I honestly think they aren't much of a player in Michigan outside certain automotive circles, which places them in third.

FWIW, Comerica still has a large brick & mortar presence is SE Michigan (not to mention Comerica Park) and they do have offices in 14 of the 15 largest metropolitan areas, though its total assets of $91 billion pales in comparison to Huntington's $189 billion following the latter's merger with TCF. I have no insight on the quality of Comerica's loan portfolio, but they've been placed on the nationwide bank watch list due to almost two-thirds if its deposits falling above the FDIC insurance threshold.

[TC Talks]

How would one get ahold of this watch list?

[moldyoldie]

How would one get ahold of this watch list?

Just Google "bank watch list" or "FDIC watch list" or "Moody's bank watch list". Comerica was added to the Moody's list for possible downgrade in March as the SVB debacle was unfolding.

https://www.wjr.com/2023/03/15/comerica ... restraint/

[Rate This]

And First Republic has now been seized by the Feds and sold to Chase.

[TC Talks]

And First Republic has now been seized by the Feds and sold to Chase.

I was watching this over the weekend. It seemed like there was some reluctance to take on FRC.

[MWmetalhead]

Comerica is definitely on the risky list in terms of percentage of uninsured deposits:

https://www.reuters.com/business/financ ... 023-03-13/

They expanded to California over two decades ago and are a pretty big lender in Silicon Valley (they also have tech focused lenders in Denver, Austin, suburban DC and I believe Boston).

I will say Comerica's liquidity and portfolio diversification is quite a bit better than that of the recently failed banks. The ratio of unrealized loss on held investments to uninsured deposits is definitely not the best indicator of a bank's insolvency risk, in my opinion.

Comerica views itself as a commercial bank to middle market sized companies first and foremost. Detroit is probably the only major Metro where it has a significant retail banking presence (even here, Comerica spends almost nothing on advertising for retail banking services anymore). As such, it is not surprising many of its deposits exceed FDIC insurance limits. Being successful in grabbing large deposits is not a bad thing.

[TC Talks]

Comerica is definitely on the risky list in terms of percentage of uninsured deposits:

I will say Comerica's liquidity and portfolio diversification is quite a bit better than that of the recently failed banks. The ratio of unrealized loss on held investments to uninsured deposits is definitely not the best indicator of a bank's insolvency risk, in my opinion.

How does the Short Buyers view Comerica? Perhaps that's the biggest risk.

[MWmetalhead]

Equity market speculation is not a good indicator of a bank's financial health. Need I remind you of SVB's share price as recently as last autumn?

Look at noninterest bearing deposit trends quarter over quarter or over several consecutive quarters. Also compare that to commercial portfolio loan balance patterns (especially revolver utilization as a percentage of commitments), portfolio composition by industrial sector, and risk grading trends (granted, some banks are not necessarily honest in their credit risk assessments, and I suspect such is the case with SIVB prior to its seizure by the Fed).

Here's a scholarly, well written article regarding the SIVB situation. If the LCR test were applied to banks with between $100 billion and $250 billion of assets, SIVB likely would have passed. Reason being? The LCR only requires banks to have enough high quality liquid assets on hand to cover at least 30 days' anticipated outflows. The massive run on SIVB deposit balances was not at all indicative of a typical 30 day period for them.

https://bpi.com/silicon-valley-bank-wou ... quirement/

[zzand]

I believe the next bank to fail has been identified. Fewest or close to that has seen it's stock take a H*** hit today.

[MWmetalhead]

Do you mean Truist? They were formed when BB&T and SunTrust merged. Their shares fell about 7.6 percent today.

I do not believe they are in jeopardy.

PacWest and Valley National are two I'd keep an eye on. Much smaller Horizon Bank (based in northern Indiana, I believe) is another I'd keep an eye on.

[MotorCityRadioFreak]

Really weird that both the 1920's and 2020's are the scene of so many bank failures.

[audiophile]

I was kind of thinking it was 1979 again:

Weak democrat in White House, stagflation, high gas prices, government overreach on energy, Iran causing trouble, Russia invading a neighboring country...

Republican governor named Ron running for president...