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  • Which Large Banks Do Short Sellers Love, And Why? [View article]
    That depends on the RoATCE, leverage and expected per share asset growth of the bank. Which bank are you looking at?
    Jun 12, 2013. 04:07 PM | Likes Like |Link to Comment
  • Which Large Banks Do Short Sellers Love, And Why? [View article]
    7% seems high to me. It's certainly very high relative to many banks. What would you consider high?
    Jun 12, 2013. 09:31 AM | Likes Like |Link to Comment
  • What A Sucker Bet Says About JPMorgan [View article]
    Correction to the above comment. $260 million.
    May 22, 2013. 08:14 AM | Likes Like |Link to Comment
  • What A Sucker Bet Says About JPMorgan [View article]
    I am not a disgruntled short seller of JPM.
    I suggest that you look at WFC and USB. Both are superior to JPM in terms of growth, margin and long-term shareholder returns.
    Let's see how well JPM does from here, or if Dimon and the financial press continue reminiscing about what happened in 2008.
    May 22, 2013. 08:11 AM | 1 Like Like |Link to Comment
  • What A Sucker Bet Says About JPMorgan [View article]
    All I'm saying is that long shots should pay out big. I can't tell you what the exact probability of one of those 100 (not 400) companies defaulting within the span of four months is. But It strikes me that it's a lot lower than 72%. One way to assess this would be to look at how many of the other 99 companies subsequently defaulted. But even if you thought the default probability was 90%, the bet would have a positive expectation of only $260, with a 10% chance of a total loss. Way, way more aggressive than an investment in the stock market, even a leveraged one.
    The less sure you can be of the probabilities, the more conservative you should be, right?
    May 20, 2013. 03:37 PM | 1 Like Like |Link to Comment
  • How Fast Can Banks Grow? [View article]
    No. Banks aggressively leverage their equity. Every $1 of equity supports $14.28 of assets if the bank has equity/assets of 7%. So the $0.60 can be leveraged. Over and above the $0.60 increase to assets (and equity) from earnings, the bank can add another $7.97 of assets, with an equivalent amount of liabilities. If they didn't do this, equity/assets would grow over time (leverage would fall) and ROE would fall dramatically.
    Apr 12, 2013. 11:33 AM | Likes Like |Link to Comment
  • How Fast Can Banks Grow? [View article]
    $0.60/7%=$8.57. That $0.60 of equity allows you to add $8.57 of assets, assuming you maintain a fixed equity/assets ratio of 7%.
    Apr 1, 2013. 08:22 AM | Likes Like |Link to Comment
  • How Fast Can Banks Grow? [View article]
    A bank with $100 of A-PS and a 1.00% RoA earns $1.00 of EPS. If it pays a $0.40 dividend, that means $0.60 goes into the equity account. If the bank has 7% equity/assets, that $0.60 will allow the A-PS to increase by $8.57.
    Now let's change the RoA to 1.25%. The bank earns $1.25 of EPS. If it pays a $0.40 dividend, now the equity account increases by $0.85 and A-PS can increase by $12.14.
    Mar 30, 2013. 06:16 PM | 1 Like Like |Link to Comment
  • How Fast Can Banks Grow? [View article]
    What I was trying to say was buying a bank when its stock price implies the expectation of A-PS growth over 6% is dangerous, because most banks are unlikely to exceed this growth rate.
    I ignored liability growth because any specific bank keeps its equity/assets ratio within a fairly narrow range, and that constrains liability growth.
    Mar 28, 2013. 06:11 PM | Likes Like |Link to Comment
  • Why An Acquisition Won't Increase New York Community Bancorp Inc.'s Value By $2 Per Share, If At All [View article]
    I blame Koelmel for the questionable deals FNFG has done, not the FNFG Board. With that said, why was Koelmel pushed out? Was he unrepentant and eager to do even more deals? Has the HSBC branch acquisition been deemed a failure internally? It might have been better to keep him in the CEO seat while a replacement search and/or sale process was conducted. I doubt anyone will buy FNFG today at anything other than a bargain price, given the problems the bank appears to have.
    Mar 28, 2013. 09:44 AM | Likes Like |Link to Comment
  • Why An Acquisition Won't Increase New York Community Bancorp Inc.'s Value By $2 Per Share, If At All [View article]
    I don't assume the shorts are right, but I don't dismiss them either. I think the shorts are thinking that NYCB is overvalued even if it can keep paying the current dividend, and it might have to reduce it. And if NYCB is desperate to show "progress" by undertaking a large acquisition, it might very well overpay. There are three very good reasons to think the shorts might be right. What are your counterarguments?
    Mar 19, 2013. 02:19 PM | Likes Like |Link to Comment
  • Why An Acquisition Won't Increase New York Community Bancorp Inc.'s Value By $2 Per Share, If At All [View article]
    How do you explain the 7% short interest in NYCB shares? And how do you explain that NYCB's 2003's EPS of $1.65 was its best ever, and 2014 EPS, 11 years and more than $2 billion of acquisitions later, is expected to be only $1.01? That's not growth, it's shrinkage. It's not success, it's mediocrity. If NYCB can't grow (and zero growth would actually be an improvement over negative per share growth), it's worth about $10-$11 per share.
    Mar 18, 2013. 09:32 PM | Likes Like |Link to Comment
  • Why An Acquisition Won't Increase New York Community Bancorp Inc.'s Value By $2 Per Share, If At All [View article]
    FNFG's market cap is $3 billion. Who will buy them? It has to be a bank with at least a $10 billion market cap in my opinion, one with a presence in FNFG's existing or contiguous markets, but not so much as to require big divestitures. It's a short list, and I think buyers would want to see growth in earnings and TBV-PS before taking the plunge.
    Mar 14, 2013. 10:23 AM | Likes Like |Link to Comment
  • Advice For Capitol Federal Financial, Inc.: Pay More Special Dividends And Stop The Share Buybacks [View article]
    I think if CFFN could add $1 BN of assets yielding 4%, and fund those assets with $1 BN of liabilities costing 3.5%, even though the 0.33% net after-tax yield on those new assets would depress current RoAA, such addition would be a positive for RoATCE and TCE/TA and I would support it.

    If CFFN buys in $1 worth of stock and assets shrink by $1, that's one thing. If it buys in $1 worth of stock and assets shrink by $1.25 (meaning an additional $0.25 of assets and liabilities roll off), that's completely different, and worse. Qualitatively, the latter is what's happening at CFFN.

    My point with respect to TBV-PS is that CFFN's share price appreciation has come from multiple expansion. I agree that late in 2008 CFFN's share price had to be supported by the expectation of the second stage conversion, which would eventually increase TBV-PS and lower the multiple. But the fact is that CFFN's stock enjoyed a very real, very material price increase leading up to this. No conversion on the horizon means no giant price/TBV-PS expansion, and therefore probably no major share price increase either.

    I would encourage you to model your view of the future in Excel. I estimate that a long-term investor buying shares today will earn an IRR of about 4%. You might say CFFN is low risk and therefore such a low return is acceptable. If you did say this, I'd disagree.
    Feb 28, 2013. 10:13 AM | Likes Like |Link to Comment
  • Advice For Capitol Federal Financial, Inc.: Pay More Special Dividends And Stop The Share Buybacks [View article]
    If an institution is grossly over-capitalized the way CFFN has been since year-end 2010, it's possible for equity to shrink and assets to grow at the same time. Just add liabilities. But we've seen asset shrinkage, over a very long period of time.

    That's an indication to you that management is conservative? It's an indication to me that the institution won't ever grow.

    CFFN's regular dividend is $0.075 per quarter, so the current dividend yield is 2.5%. Assuming you mean a 5% dividend yield when you say mid-single digit, your intrinsic return forecast of 13-16% assumes 8-11% price appreciation. With materially shrinking TBV-PS, that means you're betting on material multiple expansion, which I guess is supposed to come from RoATCE improvement.

    CFFN traded as high as 4.3x TBV-PS in September 2008, which I'd attribute to the expectation of the second-stage conversion. Maybe you think CFFN's multiple is poised for expansion. You can call that long-term thinking, but I can't agree.
    Feb 27, 2013. 02:54 PM | Likes Like |Link to Comment
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