Monthly Archives: March 2015

Searching for banks with CompleteBankData.com

One of the advantages of CompleteBankData.com is that the tool provides almost unlimited access to current and historical banking data.  A user can create extremely customized point in time searches over very granular data.  Want to find how many banks had between $35,000-90,000 of auto lending in 2006 and less than 40 employees in Iowa?  Creating that search isn’t a problem, it’s actually very easy.

The problem is that while the complex can be made easy it’s sometimes harder to do the easy things.  In providing users with unlimited search capabilities we figured users would take advantage and create complex searches.  What users actually did wasn’t what we expected.  Most users craft searches over one or two data points and not much more.

In this post I want to show how to construct a simple search to find banks trading for less than 120% of book value, less than 3% of NPA/Assets and a return on equity (ROE) of between 5% and 20%.

Log into CompleteBankData.com and on the top menu bar hover over Search and select Search Holding Companies.

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CompleteBankData.com contains two search pages, one for banks, and one for holding companies.  Market data searches are on the holding company search page.  The holding company search page will load with one default criteria search, total assets for holding companies over the most recent report period.  The screen looks as follows:

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To add additional criteria click the Add Additional Criteria button.  This will bring up a dialog box with search criteria options.

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Scroll to the bottom and click on P/B to add the Price to Book metric.  Select additional metrics you wish to search over by clicking on them.  Once you are satisfied with your selections click on the Done button.  The criteria fields you selected will now be shown on the search page.

Adjust the ranges for each criteria by manually editing the lower and upper bounds, or using the slider to graphically adjust your selected criteria.  When you are satisfied with your selections and the ranges click the Search button to execute the search.

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Result matches are shown in the table below.  Click on a bank name to bring up the action menu.

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Select View Detail to bring up the detail page for the specific bank.  Once selected the detail summary page is opened.

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On the detail page relevant statistics are shown at the top of the page under the graphs.  Summary financials are shown below the Statistics table.  To access more financials select the Summary drop down menu at the top right of the screen.

If you have any trouble or would like additional help on creating more advanced searches please don’t hesitate to contact us.

High Yielding Bank Stocks

In a low rate environment finding investments with high yields is rare.  Even more rare is finding a set of bank stocks with high dividend yields.

I used CompleteBankData on the Bloomberg (APPS BANKS <GO>) to find a list of the highest yielding bank stocks with more than $1b in assets and yielding more than 4.4%.  The list of matching banks are shown below.

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It should be no surprise that New York Community Bancorp is the highest ranked stock.  The bank has built a reputation as favorite for dividend investors.

All of the banks on the list have low Texas Ratios.  The Texas Ratio is a short hand risk rating, the lower the Texas Ratio the better.  Bank with Texas Ratios below 20% are considered to have a very low probability of issues within the next few years.

One additional item worth highlighting is that this list of high yielding banks all have relatively strong returns on equity.  The bank with the lowest return on equity is Northwest Savings Bank, a recent mutual conversion.

For investors with an appetite for dividends there is probably a stock or two in the above list that’d make a great addition to your portfolio.

Disclosure: No positions

A Basel III discussion regarding capital

There has been a collective groan from the leagues of bankers as they consider what they might need to do to comply with Basel III capital guidelines.

Basel III is a set of voluntary banking guidelines for capital adequacy, market risk and stress testing.  The Basel III accords do not regulate banks, but bank regulators have taken a liking to the Basel guidelines and have used them to form new regulations.

In the United States regulators approved an inter-agency proposal in October of 2014 outlining the US version of Basel III compliance.  The guidelines are comprehensive and the goal of this post isn’t to summarize what the regulators have decided.  Instead I want to focus on one specific aspect of Basel III compliance and look at how many banks will be forced to raise capital in the near future.

Under the new Basel III capital guidelines banks are required to have higher levels of capital to protect against losses.  Under the new guidelines banks are required to have 4.5% of equity capital and 6% of Tier 1 capital.  Regulators can require higher capital levels beyond those based on economic factors or risk weighted factors.  An additional rule is that common shares and retained earnings must be at least half of a bank’s capital.  This will be a high hurdle for some banks to overcome if they’ve had significant losses in the past due to the Financial Crisis.

A lot of the outcry over the new regulations has been that community banks will be unfairly punished.  The argument is that these small banks that serve local communities will be forced to raise significant amounts of capital and that regulations will imperil their business.

I decided to dig into the data.  At the end of Q4 2014 there were 42 banks in the US where their equity capital plus retained earnings were less than 50% of their Tier 1 capital.  These 42 banks will be required to merge or be forced to raise capital to be in compliance with the new Basel III guidelines.  As expected all of these potentially deficient banks are small community banks.  The largest potentially deficient bank has $1.03b in assets and the smallest $31m in assets.

If the criteria is loosened to include banks whose equity and retained earnings are less than Tier 1 the number of banks increases to 86.  In the increased set only two have assets over $1b, and four have assets over $500m, the rest are sub-$500m in assets institutions.

Many of these institutions will decide that it’s easier to merge rather than raise capital or exist under the new regulatory regime.  For investors there are 18 listed stocks in the first group and 42 listed banks in the second group.

Based on the data the criticism that Basel III will unfairly hurt small banks appears true at first glance.  The banks potentially most deficient are small community banks.  What the data misses is that all banks will be potentially impacted.  This is because the Basel III guidelines are more conservative in the types of assets banks can hold for regulatory purposes as well as requiring certain types of assets to meet liquidity guidelines.

What we do know from the data I pulled is that the banks most deficient are smaller community banks.  What happens to these banks is yet to be seen, but this will probably fuel the merger and acquisition story for the next few years.