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  • Banks Over Reserved Over Capitalized And Under Valued 0 comments
    Nov 30, 2012 12:08 PM

    If you think the economy is improving keep reading....if you don't skip this blog.

    Currently banks in my state are holding unprecedented levels of capital and reserves. In some cases 300% more of each. They are also being valued on the stock market today at 75% book where at times in the past they got up to 200% of book.

    What happens now? Has this ever happened before?

    Do you really think these banks can all triple their balance sheets and apply the capital? No they can't? Do you think any board is going to merge and give away this capital at less than par. No way.

    So what happens?

    I bet share buy backs.

    I wish the government would De-Tarp these banks.

    I wish the shareholders could return these excess funds tax free. But they can't so watch for share buy backs. Watch for mergers where by one bank uses the other banks capital and reserves to buy out the stupid shareholders who get out at these prices. Wall street merger advisors where are you when these banks need your advice. Let's get creative and help these bankers spend their money. They have too much in my opinion.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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