CorpusColossus
@CorpusCol
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5,249
Watching through a telescope from atop the Citadel, waiting for an opportunity to tell Rictus what to do. All to build a better world, of course.
USA/Hexagon
Joined October 2020
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"Do not my friends become addicted to water. It will take hold of you and you will resent its absence." - Immortan Joe.
Not financial advice.
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@zerohedge
@StanphylCap
The green attitude is a luxury that we can no longer afford.
More broadly, the woke attitude was a daydream of people who didn't have enough problems to solve so they created some new ones. Reality has trumped those spurious problems with some real and pressing ones.
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@KingMike273
@DudespostingWs
It’s actually there, not their.
Just wanted to make that clear so there wasn’t any confusion.
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In preFDIC days, the bank run playbook was (1) pile up gold behind the tellers (2) pay out every withdrawal with very slowly to buy time & dispel panic (3) call your bank pals for loans (4) get a prominent community leader to make a public deposit. Some times it worked. For SVB
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1/ Anyone who has been around the block in U.S. bank investing knows that construction lending is the ultimate party drug: it juices returns, gets you hooked and then ruins your life.
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Random thought/
Why were all the “trust the science” dudes against nuclear power when science was pretty clear that it was a good idea?
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My predictions for the weekend:
A buyer for SVB emerges with a moderate release of over the FDIC cap deposits. And Congress calls for a new round of regulation on liquidity management that will lower LT industry ROE noticeably.
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@whatifalthist
Huge tax breaks for foreign film production meant lots of opportunities for young actors.
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Since the Fed is resting, the current big factor for bank stocks is credit weakness. This is a short tweet to alert you to which banks are seeing alarming deterioration.
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@Storage_Venture
Women think that men are incapable of taking care of children. It's very strange.
Unfortunately, this spills over into terrible treatment for fathers in family court during custody battles.
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If you're wondering why tiny bank stocks are having such volatile reactions to earnings, it's because this is the once in a decade moment when we discover who actually knows what they've been doing and who has been faking it.
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To focus on US banks' mtm hit on the AFS bond portfolio (acronym=AOCI) is understandable, but myopic. There are actually 4 interest rate mtms on a bank's balance sheet. AOCI is the only one we regularly use. It's like adjusting the price of the kitchen and not the whole house.
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The $SBNY shutdown is quite odd. It still $6B equity even after a markdown on the HTM bonds. Ran out of marginable assets perhaps? Granted the loans are heavily 5 yr fixed on NYC RE, so there's embedded loss there, but the FDIC has jumped the gun by its historic standards.
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Your 1Q Bank Result CheckList:
1) cheap deposits now create most of the value in banking while most loans (ex cards) destroy value. How much did the $ of deposits with rates <1% change from 4Q? Was the change in volume more than offset by wider spreads vs. avg fed funds?
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As we exit a decade of abnormally great credit for US banks, I went through the call reports of all banks with $1B+ in assets to look for early signs of credit deterioration. I'm only flagging those where the Q/Q change is more than 0.5% of loans.
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Slow change is great for banks and rapid change is bad. In credit, it's because underwriting looks backward and rapid change nukes rules of thumb. With rates, it's because asset yields are contractual while deposit costs are behavioral and rapid changes change behavior a lot.
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(3) the equity offering was too slow and lamely executed by complacent ibankers. It needed to be a fair accompli instead of relying on the stock to hold up (4) the "community" leaders turned out to be weasels instead of lions.
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@CodifyBaseball
The weird thing about Arraez is how his hits don't translate into runs. His Padre production projected to 162 games is 295 hits (easily a MLB record), but only 86 runs scored (less than half Ruth's record and not a great year). And the Padres have a slightly above avg offense.
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@whatifalthist
He failed to dominate Corsican politics because Paoli had more tribal loyalty. So Napoleon went to rationalism>tribalism.
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@kunley_drukpa
Every time there's a South African miner's strike, this is what it's all about. The miners are actually among the highest paid workers in the country, but they have so many hangers on that they still skirt poverty.
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@visegrad24
So, no problem with a larger, highly militarized neighboring country invading….let me write that one down for future use!
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IMO the millstone on bank stocks is shifting from margins to credit. For the past several quarters, I've highlighted the publicly-traded banks where problem loans in various buckets rose by 0.5% of loans from the previous quarter, which is a lot.
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@spomboy
As long as the deposits don’t leave there’s no problem. If they do, there’s a problem.
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@CodifyBaseball
On a pace for 567 RBIs, which would break Hack Wilson's current record of 191.
However, Wilson achieved this with a 154 game schedule, so Betts' record might need an asterisk.
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A major US bank narrative is that $JPM, $BAC and the other megabanks will crush the community banks like beetles with superior IT. This is a little true, but mostly not.
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@FIGfluencer
For my first management meeting I somehow thought that notes would be seen as a sign of weakness, so I prepared heavily and memorized everything.
It worked. But a coworker who went down the elevator with management said they were comparing me to Rain Man.
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Panic selling of the microcap banks seems to be over for now. Nobody has hit one of my openly insulting bids since 1033AM.
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This is your annual reminder that the Mets restructured Bobby Bonilla's contract at a 9% interest rate because they could reinvest the money with Bernie Madoff at 11%+.
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It should be obvious, but somehow isn't. If a company prioritizes "fairness" over excellence, it will lose all its excellent employees to a competitor that values them. And the customers will gradually follow.
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Now that we've put the bank liquidity scares to bed, perhaps we can focus on what margin pressure means for the sustainability of bank dividends. Since the bulk of 1Q margin pressure occurred in March, 2Q is going to be rough too.
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Nobody asked, but I think the Ukraine will win. Russian superiority in armor and airpower won't matter much in urban fighting against an opponent with high morale. Think Fallujah. If Russia had well trained troops with high morale, it would still take a lot of casualties.
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Most of US VC capital raises end up in SVB accounts. Freezing that money means that the VC sector is in a coma until a buyer for the business emerges.
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Inspired by one of
@FredEarle4
's outbursts, I checked in on Hyperion Bank. Last year it earned a record 9.6% on equity while having 34% of its loans in the construction category. That's like getting minimum wage to carry a torch through a refinery.
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The median US bank earned 4.29% on assets* in 4Q. LIBOR* is 4.56%. Are the banks screwed? Yes and no. The median cost of funding those assets in 4Q was only 0.96%. Financial folks think everyone is like them and wants to get paid the interbank rate, but that's not so.
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@whatifalthist
The Serbians and the empire of Stephen Dushan. Caused WWI and genocide in Kossovo. And now isolation from Europe.
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As one would expect from a 4:01PM Friday release, the 2Q results from $HIFS were not good. Still, the NIM stayed above 1%, which was not a foregone conclusion.
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$HIFS reports after the close on Friday again and again it is unpleasant. Core EPS were $0.86 as the NIM goes under the Mendoza line to 0.89%. ROE = 1.7%.
50%+ of bank investing is avoiding bad news and 50%+ of bad news comes out after 4 on Fridays.
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A law from 1994 prevents banks with >10% of US deposits from M&A of more. As the megabanks grew mostly thru M&A that should've capped their growth. This thread will see how that has played out - TLDR $JPM is kicking ass, $BAC is choosy, $WFC is in a daze. More as time permits.
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Since I don't own it, I'm delighted that $SIVB is down 37% on the cap raise. This will prevent ibankers and regulators from pushing spot seconardies as a painless panacea to the banks' predicament.
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The Knievel School for Risk Management in Banking salutes the brave bankers who saw higher cap rates, higher mortgage rates, labor shortages and supply chain issues and decided that the logical strategy was to take much more risk in construction lending.
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Hint from Bankland to $WEX owners: loans at Wex Bank 30+ delinquent went from $136 mil. on 9/30 to $417 mil. on 12/31. The second number is 13.7% of all loans.
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Fascinating 4Q from $FRC. Stock up on beat, but DDA -9.2% Q/Q, IB deposits +14.1% Q/Q because paying 89 bps more Q/Q, while the loan yield rose only 27 bps. Earning assets up $5B, interest-bearing liabilities up $13B. Can't see this working long-term.
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This is your timely reminder that on days like this, people sell what they can rather than what they should.
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@whatifalthist
The Japanese have very long commutes and quasi-mandatory bonding sessions with coworkers, so time away from home is more than Americans.
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Wanted to point out an after-the-Friday-close release (a dubious practice) from $HIFS = $1.53 vs. $4.77. Poor due to NIM down to 1.05% but not heinous since asset quality is still great and they earn their tiny dividend.
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I'm going dark for the next six weeks to retrain my brain to think longer and more subtle thoughts. I will monitor my DMs, but not reply to most. See you in mid-July.
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U.S. banks look cheap on a P/E basis and near-term estimates are likely way too low. But (1) while the credit losses around the corner should whack the nonbanks harder that doesn't mean the banks escape completely (2) depositor behavior could change and nuke some small banks.
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@commbankerguy
Every community (however defined) is going to end up with one (1) community bank. If you can identify the survivor and a role for yourself, you’re gold. If not, flee. But don’t flee to fintech, it’s mostly BS and whatever value add exists is in the IT.
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@whatifalthist
It was generally concluded that it was necessary for social peace. Then the managerial class pretended it would have no economic or societal cost and went full speed ahead without any broader discussion.
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which doesn't appear have the playbook because it was old and they were new, (1) was the balance sheet and daily bond prices went reality was TOO clear (2) with the exception of the portal going down on Thursday PM, I haven't heard of other roadblocks to withdrawal
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Just back from the Balkans. A reason the Byzantines lasted 1000 years after the fall of Rome was that they sowed mistrust among the Balkan nations so they'd fight each other and not attack the East Roman Empire. Their success survives them - everyone hates everyone else here.
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@CodifyBaseball
When you consider that everyone was cheating, but nobody else reached this level, you realize what a great player he was.
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Do not expect long stock ideas - if they're really good I will buy them myself and with the trading volume so low I seldom have a full position. I no longer short, but will occasionally make heavy hints in that direction.
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IMO, you should keep both eyes on the spreads between loan yields, the bond portfolio and deposit costs. If those go negative, then it's time to run for the exit. Similarly, if the bank can't minimize deposit loss at a reasonable cost, there's no reason to stick around.
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@BarryRoland19
You left out that the handyman gave a window of 1-5 and then showed up at 1030.
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@MarcRuby
The US dispersion of financial power is a double-edged sword. It leads to a lot more failures, but it also leads to much greater economic creativity and less power concentrated in the country's major financial city. It's creative destruction on a huge scale.
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@CodifyBaseball
@WatchMarquee
The 1936 Reds ended up with a losing record and scored less runs than the league average.
So I'm telling you there's a chance.
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Most banks are dragging their feet on deposit rate, trying to max margin while minimizing runoff and thus sale of underwater bonds. $PNFP is paying up for deposits (+103 bps Q/Q) and grew loans at 20%. Bold strategy, Cotton. It's only possible since the loan portfolio floats.
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After Friday close EPS release for $HIFS. For the first time in several years, the margin went up.
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@Cokedupoptions
What you're missing is that you're assuming appreciation 365 days/year when the market is only open for 250/year. So it should be more like 0.038% per trading day.
Few understand this.
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@QTRResearch
@WallStJesus
The synergies of acquiring $HOOD only make sense if the buyer has infinite legal/regulatory risk already.
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The pro-Hamas protests have awakened the European centre to the dangers of their immigration policy. Expect boat sinkings and forcible deportations soon. It will be very ugly. There are decades when nothing happens and weeks when decades happen.
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@Cjdon25
@visegrad24
True of almost every other country in the world. Without the USN, it’s chaos very quickly.
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$UBAB hasn't reported yet, but the call report for its larger bank shows some unpleasant developments in loan quality. Go take a look on the FDIC website.
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$JPM rescued Wamu & Bear and was rewarded with tens of billions of fines and settlements. Now WE pay the price. Nobody can afford to rescue $COIN or $HOOD because the legal costs will be too high.
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Why hasn't anyone written a book on the disarray at Wells Fargo and failure of the Kovacevich/Stumpf template? There's bound to be enough dirt for 300+ pages.
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@whatifalthist
Does anyone think Eurasian and Finnish metal is better than American metal music?
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Hate to be that guy, but looking at the regulatory call reports (RC-B & RC-C Pt 1) on asset repricing, there's really no evidence that NIMs will inflect up as a significant amount of assets reprice for quite some time.
Spread income will be driven by deposit pricing and growth.
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Just met someone who washed their rental car, this disproving the old maxim “nobody ever washed a rental car”. I need to re-examine my core beliefs from the ground up.
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@whatifalthist
I’m not cool with securities fraud and repeated, massive stock market manipulation on a scale not seen in the last 90 years.
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For years I've hoped that the adjacency of an ageing Europe and failed states filled with angry youths somehow wouldn't end up as an apocalyptic civilizational clash. But here we are. It's going to get a lot worse.
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And on the two more important issues, all the work in the world won't get you closer to a more informed opinion until more time has passed. Which means the stocks aren't going up much for a while.
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Thoughts on $SIVB:
(1) it really needs to raise that amt and now it's more shares and more dilution. Major dilution vortex.
(2) the VCs pulling their deposits need to consider that the only other provider to the space is $CMA. Their service historically has been less great.
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To mark 3,000 followers and a very layover, AMA until the NY open.
Symbols:
{}= not telling you that for doxxing reasons
& = more nuanced answer require too much time and too many characters
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@eyemightbewrong
Get a separate card with a low balance and use it as a screening tool to separate the keepers from the deplorables. It's a corollary to not flying business class with them for the first year.
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@ohcapideas
Meh. FDIC data shows $MTB with 17 sites in the city. The HQ has 95.3% of the deposits. What they're doing is depositing all their national biz at the HQ. That's the way that TD has 38% share in Wilmington even tho MTB is really the dominant bank on the ground.
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@GRDecter
The loophole in the governing legislation (Reigel-Neal Act of 1994) already exists providing for the acquisition of failed institutions.
Which is how JPM got Wamu in 2008.
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A choice between a moderate governor of a swing state with a record of responding fast to disasters OR a liberal governor of a safe state with a record of letting his largest city burn does not seem difficult.
And yet here we are again.
BTW, I self-identify as a RINO.
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Reasonable results out of the megabanks and the early reporting microcaps (which tend to be well-managed). Expecting more End of Days fodder as the herd straggles in. Hope I'm wrong - investment performance is preferable to Cassandran schadenfreude.
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