Weiss Ratings

Value, long-term horizon, research analyst, growth
Weiss Ratings
Value, long-term horizon, research analyst, growth
Contributor since: 2011
Company: Weiss Ratings, LLC
The original article in January "14 Undervalued Bank Stocks" (http://bit.ly/KRifU8) discussed the criteria used in establishing the Undervalued Bank Stock Portfolio. However, to summarize, we did use the average P/E ratio for the entire banking industry based on December 31, 2011 data which was 11.62x for all undervalued bank stocks listed in the article. It should be noted that the historical banking P/E has been approximately 14x earnings.
The Weiss Ratings evaluation includes all of Banco Santander financials -- in Spain and outside of Spain. It is important to review global institutions holistically to get a complete picture of their financial strengths and weaknesses.
Weiss evaluates major components of a bank’s finances. Banco Santander rated “fair” or “good” in most categories. Then atrocious asset quality, a major component of an institution’s ability to remain stable, grow and generate profits drove the rating down further. Here are just two measures of asset quality that jump out as very concerning:
• Nonperforming loans are a whopping 45.5% of core capital vs. 31.5% average
• Net charge-offs to total loans at 1.91% is almost 3 times the global bank average
We believe Banco Santander warrants its D- (Weak) rating.
Vivid description of the tragic and never ending realities of many nations past, present and future. The point that Weiss Ratings is trying to articulate is that even as the beneficiaries/victims of the bubble and squeak economies are going through the current financial crisis there is now a pandemic that has spread to the previously healthy. Countries, such as Sweden, have been fiscally conservative for a very long time but even they are now feeling the effects.
@vvvvviking Unfortunately we are space limited and frankly the subject is enormous, so I hope I was able to get the main point over about the difficulties facing the industry using GNW and MGIC as examples.
You are correct about reserves playing an important part in all of this, decisions regarding reserves can result in over/under reserving for losses and adding to reserves can result in losses whereas releasing reserves can result in profits. Control lies substantially within the companies themselves.
@tommiegun regarding Radian profitability we looked at the individual mortgage insurers for profitability and @Andrew Mann the major source of data is the quarterly statutory financial statements. This allows for direct comparison of the performance of the individual entities in a group, and I can assure you that Radian group mortgage insurers lost $696.9 million in 2010, $257.2 million in Q111 and $39.3 million in Q211.
@WEF451 According to all the reports, the new books of business are indeed performing well. Unfortunately these books are far outweighed by the bad business and only time will tell how it will all pan out. As far as setting up new businesses to segregate the bad from the good business I think that this might happen if the regulators take action to suspend additional business on capital grounds but the insurers need the good business on the books to help offset the bad, and the cash flow that it provides.