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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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Top-Five Banks: Q1 '24 Earnings Setup

Updated: Mar 21

March 20, 2024 | Premium Service | First, let’s start with some happy thoughts. Over the past year, the WGA Bank Top 25 Index is up 39.7% vs 28.8% for KBWB. Because there are only three stocks that overlap the two groups, it is possible for KBWB to outperform the WGA Bank Top 25 Index, as it did over the past two months. This dichotomy is a product of market volatility and size. It also illustrates why a long/short strategy is required with financials. Of note, the WGA Bank Top 10 Index continues to outperform the larger KBWB.

In our last issue, we talked about the latest developments at New York Community Bank (NYCB). After our comment was posted, Raymond James (RJF) analyst Steve Moss downgraded NYCB from its earlier rating of market perform and set a fair value estimate of $3 a share. Later, an official of NYCB accused us of “wild speculation.” We stand by our comment, but we'd be delighted to be wrong.

Needless to say, after receiving that vote of confidence from NYCB, we sold the rest of our position in the stock. This is not IndyMac in 2008, ladies and gentlemen. That bank was closed in July 2008 and cleansed in an FDIC receivership before being sold nine months later to a group of investors led by former Treasury Secretary Steven Mnuchin

On March 19, 2009, the Federal Deposit Insurance Corporation completed the sale of newly chartered IndyMac Federal Bank, FSB, to OneWest Bank.  The deal occurred because the Federal Open Market Committee had begun cutting interest rates months before. The FDIC led by Chairman Sheila Bair also put loss-sharing on the table. The proverbial investor crowd filled the empty room. But, of note, OneWest was the first and last investor sponsored bank sale by the FDIC post 2008. 

Based upon last week’s 10-K from NYCB, we don’t see how the bank’s situation will be resolved short of an FDIC receivership and sale a la IndyMac. Where did we put the proceeds of the sale of NYCB shares? Into U.S. Bancorp (USB). Along with Wells Fargo (WFC), USB is one of the most improved members of the top-five banks. Below we discuss some of the largest banks measured by assets to set up our readers for Q1 2024 earnings.

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