Here is a comparison of more banks and thrifts. In looking over this, I continue to doubt the wisdom of BAC's acquiring CFC. The upside does not seem to justify risking the downside. The spreadsheet below compares the five banks I have looked closely at over the last few months – WFC, STI, BAC, MTB and ZION across various parameters, primarily with respect to their asset quality. Please note our observations on the same and be aware that this is backwards looking from research I commissioned some time ago:

1. STI has high real estate exposure, higher NPA and 90+ days loan delinquent as proportion of tangible shareholders’ equity, lower allowance as a percent of NPAs, higher Texas ratio, higher ET shortfall to tangible equity, and lower NIM. Though STI does not report the geographic distribution of its operations, its primary markets include Florida, Georgia, Maryland, North and South Carolina among others. High exposure to Florida could make the bank highly susceptible to rising risk of loan losses. However, a noteworthy factor is that the stock has already gone down by around 50% over the last year.

2. BAC has the lowest tier 1 leverage and NIM among the group and relatively higher gross charge-offs and NPAs to tangible equity. We believe that BAC prospects should be considered together with the probable impact of the impending CFC takeover. This requires a detailed analysis of CFC’s state of affairs, which is horrible from the anecdotal research that I have gathered. Since I am in a rush, I will simply post the spreadsheet and comment on it throughout the day.

3. M&T also has a high real estate exposure and high NPA and 90+ days delinquent loans to tangible equity. However, it seems better provisioned that STI and has higher NIM than STI.

4. WFC also seems vulnerable primarily owing to high exposure to California and Florida, higher proportion of gross charge-offs and poorer capitalization.

Comparison of banks
Wells Fargo SunTrust Bank of America M&T Bank Zions Banc
WFC STI BAC MTB ZION
Stock price (last close) As on June 6, 2008 25.42 46.32 30.50 81.18 39.45
Price Performance (Absolute)
1 months -13.48% -16.16% -18.30% -11.26% -12.08%
3 months -9.57% -15.89% -16.98% 5.03% 12.33%
12 months -29.33% -47.48% -39.06% -25.91% -50.84%
Market cap 84.75 bn 16.28 bn 136.26 bn 8.94 bn 4.24 bn
1Q08
Wells Fargo SunTrust Bank of America M&T Bank Zions Bank
WFC STI BAC MTB ZION
Total loans ($ mn) 386,333 123,713 873,870 49,279 40,064
Loan composition:
Commercial (other than real estate) 24.0% 30.2% 30.5% 27.4% 46.0%
Commercial real estate 16.6% 10.4% 7.2% 37.0% 34.8%
Residential real estate (including home equity) 38.4% 49.5% 44.0% 23.6% 16.0%
Consumer loans 19.2% 9.9% 18.3% 12.0% 1.9%
Total real estate exposure 55.0% 59.9% 51.2% 60.6% 50.8%
Growth in total loans (q-o-q) 1.1% 1.1% -0.3% 2.6% 2.1%
Commercial (other than real estate) 2.3% 3.8% 1.0% 6.0% 3.2%
Commercial real estate 2.9% 2.3% 2.4% 9.3% 2.1%
Residential real estate (including home equity) 0.8% -0.4% -1.3% NA -0.1%
Consumer loans -1.0% -0.1% -0.8% NA -6.1%
Shareholders' equity 48,159 18,431 156,309 6,488 5,328
Goodwill and intangibles 13,148 8,353 87,693 3,422 2,150
Tangible shareholders' equity 35,011 10,078 68,616 3,066 3,178
Total NPAs 4,495 2,320 7,827 548 434
NPAs as per cent of total loans 1.2% 1.9% 0.9% 1.1% 1.1%
Growth in NPAs (q-o-q) 16.2% 40.1% 31.6% 12.4% 53.0%
NPA composition (as % of respective loans):
Commercial (other than real estate) 0.6% 0.3% 0.5% 0.6% NA
Commercial real estate 1.0% 0.5% 2.6% 0.8% NA
Residential real estate (including home equity) 1.2% 3.0% 1.1% 3.3% NA
Consumer loans 0.3% 0.4% 0.3% 0.6% NA
Loans 90 days or more delinquent still accruing 1,631 744 4,160 81 85
As % of total loans 0.4% 0.6% 0.5% 0.2% 0.2%
NPAs and 90+ days delinquent loans as % of total loans 1.6% 2.5% 1.4% 1.3% 1.3%
NPAs and 90+ days delinquent loans as % of shareholders' equity 12.7% 16.6% 7.7% 9.7% 9.7%
NPAs and 90+ days delinquent loans as % of tangible shareholders' equity 17.5% 30.4% 17.5% 20.5% 16.3%
Gross Charge offs 1,764 323 3,180 56 54
Gross charge-offs as per cent of total loans 0.5% 0.3% 0.4% 0.1% 0.1%
Growth in gross charge-offs (q-o-q) 23.62% 68.60% 39.17% -12.58% 79.03%
Gross charge-off compisition (as % of respective loans):
Commercial (other than real estate) 0.28% 0.10% 0.19% NA 0.01%
Commercial real estate 0.07% 0.00% 0.17% NA 0.22%
Residential real estate (including home equity) 0.36% 0.38% 0.17% NA NA
Consumer loans 1.15% 0.43% 1.19% NA NA
Gross charge-offs as % of shareholders' equity 3.7% 1.8% 2.0% 0.9% 1.0%
Gross charge-offs as % of tangible shareholders' equity 5.04% 3.2% 4.63% 1.8% 1.7%
Provision for loan loss charge 2,028 560 6,021 60 92
As per cent of total loans 0.5% 0.5% 0.7% 0.1% 0.2%
As per cent of NPAs 45.1% 24.1% 76.9% 11.0% 21.2%
As per cent of gross charge-offs 114.97% 173.54% 189.34% 107.52% 171.68%
Reserve for loan losss (EOP) 6,013 1,545 14,891 774 501
As per cent of total loans 1.6% 1.2% 1.7% 1.6% 1.3%
As per cent of NPAs 133.8% 66.6% 190.3% 141.2% 115.4%
As per cent of gross charge-offs 340.87% 478.88% 468.27% 1386.27% 932.60%
Texas ratio 14.9% 26.4% 14.4% 16.4% 14.1%
Change in Texas ratio from preceding quarter (bps) 1.38 5.85 2.26 1.53 4.05
Eyles Test reserve for loan loss 8,606 3,688 22,182 841 825
Shortfall as a % of tangible book value 7.4% 21.3% 10.6% 2.2% 10.2%
NIM 4.7% 3.1% 2.7% 3.4% 4.2%
Leverage ratio (Tier 1 capital / average assets) 7.04 7.20 5.61 7.04 7.18
High-risk geographic exposure
Commercial real estate loans in California & Florida 37%
Home equity loans in California and Florida 41%
Residential real estate loans in California, Florida and Nevada 40%
Residential mortgage loans in California and Florida 39%
Home equity loans in California and Florida 40%
Credit card loans in California and Florida 19%
Commercial real estate loans in California & Florida 24%

I hate to pick on these guys, but I just can't help it. From Bloomberg :

Analysts Backtrack on Banking Stocks After Saying Worst Is Over

Wall
Street analysts who only weeks ago were telling investors to buy bank
stocks because the worst of the credit crisis was over are now
flip-flopping.

Goldman Sachs Group Inc. reversed a call on financial stocks, saying on June 23 that its May 5 recommendation was ``clearly wrong.'' Merrill Lynch & Co. on June 17 cut its rating on Lehman Brothers Holdings Inc.
to ``neutral,'' just a week after telling clients to buy. Barron's, the
financial newspaper, said this week that its February advice to buy American International Group Inc. was a ``mistake.''

``Analysts probably have less credibility than they did 10 years ago,'' said Charles Geisst,
the author of ``100 Years on Wall Street'' who teaches finance at
Manhattan College in New York. ``This has just eroded it a little bit
more.'

Wednesday, 25 June 2008 01:00

Mark to Misery in the cash equivalent fund biz

Written by

This is an unconfirmed, yet interesting email from a reader:

A
bond fund closed down yesterday and it brings up another interesting
dilemma that few people if anyone wants to address, including the SEC
and that is the public mutual funds that have invested in structured
mortgage debt. Many, and I do mean many fund managers are
very well aware that their holdings are incredibly overstated in value,
yet they do not challenge the pricing companies that evaluate their
holdings, unless they view the asset in question to be marked to low.

Sunday, 22 June 2008 01:00

User contributions though mini-sites

Written by

I urge all of blog members to take advantage of the personal websites available at boombustblog.com. Here is boombust member Numb's macro snapshot of Turkey via his site.