siegfried

These 32 Commercial Banks and Thrifts May See the Dung Hit the Fan

agree--the home equity crisis is a ticking time bomb. now take your list and cull it for banks that have already taken the hit, raised additional equity and moved on, then adjust the remainder for banks "hidden assets" like the KO stock on STI's balance sheet that will add $1 billion of equity this quarter and then cull out the banks operating in geographies that have not been hard hit. You will get banks like CMA, BBT, and SNV. Still trading above book and still under reserved. Then its a race--will they have to write down before the recession turns. If the recession lasts through the year and they have to do year end house cleaning (again) then they will trade down 20% to 30% from here. If not, then you are stuck with watching them trade between their 50 day MA and their 200 day MA for the next 2 quarters.

The Worst Is Behind Us (unless massive bank failure is considered a bad thing)

From STI conference call: "We are not enthusiastically optimistic about what’s going to go on in the home equity market. We think its going to be a pretty long haul over the next year to really if we move through the HELOC specifically. Our home equity loan portfolio is older and more mature and performing really well. It really is the brokered loans where we are really having the majority of our problems. That a little over $1.8 billion, as you look at that portfolio its going to continue to cause problems over the next two or three quarters."

Housing Market Tracker - Subprime In Large and Small Banks

Last 2 Fed Reserve CMBS for Treasuries indicate rising demand to dump paper for cash--at higher interest rates

Release Date: April 8, 2008
For release at 10:00 a.m. EDT

On April 7, 2008, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 2.820 percent

Total propositions submitted: $91.569 billion
Total propositions accepted: $50.000 billion
Bid/cover ratio: 1.83

Number of bidders: 79

Bids at the stop-out rate were prorated at 67.70% and resulting awards were rounded to the nearest $10,000 (except that all awards below $10,000 are rounded up to $10,000).

The awarded loans will settle on April 10, 2008, and will mature on May 8, 2008. The stop-out rate shown above will apply to all awarded loans.

Release Date: March 25, 2008
For release at 10:00 a.m. EDT

On March 24, 2008, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 2.615 percent

Total propositions submitted: $88.869 billion
Total propositions accepted: $50.000 billion
Bid/cover ratio: 1.78

Number of bidders: 88

Bids at the stop-out rate were prorated at 98.87% and resulting awards were rounded to the nearest $10,000 (except that all awards below $10,000 are rounded up to $10,000).

The awarded loans will settle on March 27, 2008, and will mature on April 24, 2008. The stop-out rate shown above will apply to all awarded loans.

Survey of Banking Industry Intangible Assets

Also look at weak assets as percent of loan portfolio. For example, SNV has $8.008 billion of construction loans in its loan portfolio, or 30+% of its loan portfolio. This is also 233% of shareholder's equity, including intangibles. STI has 11.26% of its loan portfolio in construction loans, or 76% of shareholder's equity, before your haircut for intangibles. However, it is not working as a trading strategy, since its difficult to "fight the Fed" with revaluations of risky assets like ABS upwards.