Monthly Archives: February 2015

Finding bank stocks on your Bloomberg Terminal

In this post I want to walk through two possible ways to use the Bloomberg Terminal version of CompleteBankData (accessible via APPS BANKS <GO>)  to find bank equity investments.

To access the CompleteBankData app enter the command APPS BANKS <GO>.  If you aren’t a subscriber you can sign up for a free app preview.

Finding Ideas Using Proven Pre-Configured Strategies

One of the advantages of CompleteBankData is that we’ve leveraged our banking expertise and built over 20 investment idea generation strategies.  These strategies are refreshed based on real-time data giving you a constant stream of new investment ideas.

The Find Ideas page is always loaded in your application and is accessible via the tabs across the top of the screen.  Ideas can be sorted by bank size or category.  A screenshot of the Find Ideas page is shown below. Screen Shot 2015-02-13 at 11.11.55 AM

Each strategy shows the top five matching results.  Clicking on a strategy will open a dialog box with a full list of matching banks as well as buttons to view details, compare banks or save banks for later viewing.  Here is what the dialog box looks like:Screen Shot 2015-02-13 at 11.36.03 AM

Select a bank you are interested in by clicking on the checkbox next to the bank name.  Once a bank, or multiple banks are selected the buttons at the top of the dialog will be enabled.  For our example select a bank and then click View Details.  The detail page contains detailed financial statements as well as a valuation model for your selected bank.  You also have the ability to chart any piece of financial data on this page.

Screen Shot 2015-02-13 at 11.38.35 AM

Finding Banks with the Customized Bank Screener

CompleteBankData on the Bloomberg Terminal (APPS BANKS <GO>) has the ability to create customized bank stock screens.  The screener has been optimized to contain both market and bank specific search criteria.  Because we know banks you won’t be seeing metrics that don’t apply to banks such as EV/EBITDA sneak into the screener.

The Customized Bank Screener is accessible via the main menu.  Open this menu by clicking on the green button titled Menu on the far left of the tab bar.

The top of the page contains the custom criteria.  To add additional screening criteria click the –Select a field– drop down and make your selection.  To remove a selection click on the orange X next to the criteria.

Once you have  configured the criteria as you wish click the Search button.  Matching banks will appear below your search criteria.  The screenshot below shows a search with multiple criteria and matching banks.

Screen Shot 2015-02-13 at 11.56.12 AM

Select a bank you are interested in by clicking on the checkbox next to the bank name.  Once a bank, or multiple banks are selected the buttons at the top of the dialog will be enabled.  For our example select a bank and then click View Details.  The detail page contains detailed financial statements as well as a valuation model for your selected bank.  You also have the ability to chart any piece of financial data on this page.

A screenshot of a bank detail is shown below:

Screen Shot 2015-02-13 at 11.38.35 AM

 

More Information

Looking for more information for how CompleteBankData can give you the ultimate edge in bank equity investing?  Information about CompleteBankData including a full user guide can be found on your Terminal with the command APPS BANKS <GO> or on our website linked below.  Or contact our sales team via email or phone.

Web: https://www.completebankdata.com/bloomberg

Phone: 1-866-591-8315

Email: info@completebankdata.com

Interest rate portfolio positioning

Banks can take an explicit bet on short or long term interest rates by how they position their loan portfolio.  CompleteBankData provides a breakdown for banks showing a maturity and repricing schedule of a bank’s loan portfolio.  I spent some time today running some statistics to see how banks are positioning themselves regarding rates.

When a bank expects rates to rise they keep the maturity of their loan portfolio short term (short duration).  A bank keeps the duration short it’s because they expect their lower yielding loans to be replaced by new higher rate loans.  When rates rise banks with short duration portfolios see increases in their NIM if deposit costs don’t rise as fast as portfolio yield.  If rates don’t rise as quickly as a bank expects them to then short duration portfolio can result in a lower net interest margin (NIM).

A bank that doesn’t expect rates to rise might be more willing to lock in longer term loans.  If a bank expects rates to decline then they would want the majority of their portfolio to mature as late as possible.

Most banks in the US have positioned themselves for a rise in interest rates.  But before looking at the majority I think it’s worth looking at the minority rate opinion.

There are 18 banks in that have 80% or more of their portfolio maturing in longer than 15 years.  This means that 18 banks have decided that they are happy with current rates and would like to lock them in for the next 15 years.  This is an implicit bet on rates decreasing or staying stable for the next 15 years.

Banks making this bet range from Territorial Bancorp (TBNK), a $930m bank that primarily loans to residential borrowers to First Federal Savings & Loan a small $15m bank located in West Virginia also focusing on residential borrowers.

Before the advent of mortgage securitization if a bank wanted to keep their portfolio duration short they would need to limit their lending to only short term loans.  Securitization created an opportunity for banks to manage their portfolio duration regardless of the types of loans they originate.  Now a bank can originate a 30-year mortgage and if they decide they don’t want to hold it sell it to a GSE and retain servicing rights only keeping short term loans on their books.

Securitization makes the following statistics meaningful.  These banks have all actively managed their portfolios to keep their duration short.  As shown below the majority of US banks are expecting rates to rise sooner rather than later.

  • 3538 (more than half) banks have 50% or more of their portfolio maturing or repricing in less than three years.
  • 1099 banks have 70% or more of their portfolio maturing or repricing in less than three years.
  • 142 banks have 90% or more of their portfolio maturing or repricing in less than three years.
  • 836 banks have 50% or more of their portfolio maturing in less than a year.
  • 97 banks have 80% or more of their portfolio maturing in less than a year.

The numbers are clear, banks are expecting rates to rise within the next three years.  Some banks are expecting rates to rise in the next year, although those banks are in the minority.