WGA Bank Top 100 Index | Q2 2024

April 29, 2024 | Premium Service | On Friday after the market’s closed, the FDIC seized Republic First Bank (FRBK) in Philadelphia and sold the net assets and deposits to Fulton Financial Corp (FULT) of Lancaster, PA. The $5.8 billion Republic had a significant concentration in commercial real estate and a yield of 2% on its securities portfolio, BankRegData reports. Sound familiar?  Watch Bill Moreland's video assessment of Republic.

Kroll Bond Ratings just published a research report on its large rated universe in the commercial mortgage backed securities (CMBS) market. “The delinquency rate among KBRA-rated U.S. commercial mortgage-backed securities (CMBS) in April increased moderately to 4.67%, up 17 basis points (bps) from March,” KBRA reports. “However, the total delinquent and specially serviced loan rate (distress rate) markedly increased 79 bps to 8.29%.”

KBRA notes that the jump in distress rate was largely driven by the multifamily sector, which saw two loans totaling over $1.5 billion transferring to the special servicer this reporting period, although retail (79 bps) and mixed-use (76 bps) also experienced some large increases.

We’ll be discussing the commercial real estate market and the banks at the 31st Annual Levy Economics Institute Conference on Thursday, May 2, 2024. Of note, Blackstone Mortgage Trust (BXMT) stock declined 4.6% after reporting a net loss in Q1 due to loan problems in the office category. "The market is concerned about the credit quality of the trust's office loan portfolio, reflected in the 29% discount to book value," notes Seeking Alpha.

As the month of April ended, the US banking sector was showing signs of rising stress, both from unrealized losses on legacy securities and credit losses on commercial exposures.  Despite the rally at the end of Q1 2024, only 30% of the names in the WGA Bank Top 100 Index had positive equity returns for the first four months of the year.  But there were some surprises among the top performers as once again it is proven that size matters. 

The chart below shows the distribution of the 106 banks in our index test group, with Discover Financial Services (DFS) in the lead at #1 from the far left.  Charles Schwab (SCHW) came in at number 11 among the largest US banks and FifthThird (FITB) was number 9, riding higher on strong operating performance and a “5” handle on operating leverage. Subscribers to the Annual Plan of the Premium Service may download the latest WGA Top Bank 100 test group below. The big spike after DFS is JPMorgan (JPM).

Source: WGA LLC

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