Commerce Bancorp To Suffer Most Among Retail Banks From High-Rate Environment? (CBH)

Includes: CBH, IAT, KBE
by: Mick Weinstein

Excerpt from our One Page Annotated Wall Street Journal Summary (get it e-mailed to you every morning by signing up here):

'Convenient' Bank Poses Inconvenient Outlook

  • Summary: Commerce Bancorp's (CBH) customer-centered approach has become a model for the industry, but deposit growth is now falling amidst increasing competition for retail banking customers from higher-yielding competitors who offer fewer services. It's doubtful the company can sustain both better services and higher rates on deposits, and the bank's liabilities in this rising-rate environment are pressuring its bottom line even more than other banks'. A stock or bond issue is likely forthcoming, to meet regulatory demands on deposits.
  • Comment on related stocks/ETFs: The article makes the case very clearly that if you're looking to short the retail banks on the persistent inverted yield curve (more from Roger Nusbaum on that), Commerce may be the best way to play it. Regarding ETFs, the Financial Select Sector SPDR (NYSEARCA:XLF) and the iShares Financial (NYSEARCA:IYF) are too broad to capture this effect (they include brokers and I-banks); the StreetTracks KBW Bank (NYSEARCA:KBE) and iShares Dow Jones U.S. Regional Banks (NYSEARCA:IAT) are better.