The Institutional Risk Analyst

When Pinnacle Financial Partners, Inc. (PNFP) announced an all-stock transaction last week to acquire Synovus Financial Corp. (SNV), we were unimpressed. The markets sold off on the news and there then followed a series of stock downgrades and credit rating agency actions that were disconcerting to put it mildly. 

In an earlier issue of The IRA, we noted that one reason that the GSE shares may be suffering is that the Trump Administration is apparently wrestling with how to take Fannie Mae and Freddie Mac out of conservatorship.

Whalen Global Advisors LLC (WGA) has published the latest edition of the WGA Top 50 Banks, the fifty top performing large commercial banks in the US. Drawn from the members of Peer Group 1 and other sources, WGA screens the group based upon five proprietary measures of financial and market performance.

Citi has grown corporate loans 10% to $330 million at the end of Q2 2025. In fact, Citi increased its full-year net interest income guidance and raised its revenue forecast to the high end of its previous range. Citi saw assets and NII grow in 2025, but efficiency remained in the low 60s, a tangible indication that Fraser is making progress.

Why is Secretary Bessent talking publicly about Powell or the Fed at all? How does this squawking enhance the credibility of the Trump Administration or the U.S. Treasury?

Smaller issuers of stable coins will soon be competing with Verizon (VZN) and JPMorgan (JPM), while platforms offering turnkey coin solutions will multiply like Lantern Flies. 

Paying interest on reserves has nothing to do with whether banks lend and everything to do with enabling the Fed to manage the Treasury market. If you don’t want the Treasury market to remain open, then take away the Fed’s power to pay interest on reserves.  

The leading candidate to be the next Fed Chairman believes the balance sheet could safely shrink to around $5.8 trillion, with bank reserves potentially decreasing to $2.7 trillion. Waller argues that a shift towards more short-term Treasury bills would make the balance sheet safer and more flexible, and he is absolutely right.

We all were more than a little amused to learn that in the most recent bank stress tests the Federal Reserve Board decided to ignore the massive financial and reputation risk in private equity and private credit. With cash bids for private assets plummeting, and sponsors in full flight due to prospective litigation by jilted clients, how do the Fed and other bank regulators retain any credibility? Our friend Nom de Plumber had an appropriate observation...

Imagine if the Fed had to tell the public that federal deficits were bad for bank safety and soundness? We haven't had a Fed chairman since Arthur Burns who would speak publicly about the inflationary aspect of federal deficits.

If we told you that large cap financials are outperforming both the S&P 500 and bitcoin over the past month, what would you say? 

The Treasury market/bank industry PR lobbyist angle on the Fed's eSLR proposal is a little fake-out for the financial media. This not about buying more Treasury debt but instead buying back more bank stocks. Sabe?

We have little conviction behind our long positions in AXP and the SPX, thus the defensive recommendation in terms of sell orders.

In simple terms, FLG is not making money and does not seem to have any immediate prospects to pull itself out of a slow downward spiral of balance sheet shrinkage and operating losses.  Whereas before 2024, FLG was a peer performer in most respects, today the bank’s financial performance is significantly below-peer, bottom quartile in many cases.

We noted in the most recent IRA Bank Book that the Q1 2025 banking industry data from the FDIC was showing improvement in certain commercial line items, particularly non-owner occupied real estate. But is this another head fake by desperate banks trying to conceal rancid commercial real estate exposures?

Truth is, it’s hard to see the leadership of either RITM or UWMC combining with another entity, but the cost pressures in the industry today are driving radical change. 

The connection between expanding the balance sheet via open market purchases of Treasury debt and bank reserves is one of the starkest illustrations of how federal budget deficits translate directly into inflation.

The intriguing thing about private coin empires is that they are obviously not a positive for existing payment systems, yet neither are they dependent upon crypto. Larger sponsors may be able to create exclusive coin ecosystems without actually touching crypto assets at all. Fiat to AMZN coin, “ZON,” is really all that the sponsor needs.

Researchers at Apple just released a paper that throws cold water on the "reasoning" capabilities of the latest, most powerful large language AI models. In the paper, a team of machine learning experts makes the case that the AI industry is grossly overstating the ability of its top AI models, including OpenAI's o3, Anthropic's Claude 3.7, and Google's Gemini.

The proliferation of low- or no-cost coin systems is ultimately negative for established players in nonbank finance and payments, including the major card issuers, as we discuss below.  Still worried about interchange fees?