District Banker

Why Are Banks Holding So Many Excess Reserves?

1) Lending isn't attractive. With the current interest rate environment where it is, it is almost impossible to appropriately price risk into a loan, and still win the bid (the "there's always someone more reckless than you" theory)

2) Securities yields aren't attractive either. Agency backed MBS is trading at a meaningful premium to par, and the Fed is signaling that their support for that market will expire sometime around the end of Q1.

3) So if lending isn't attractive, and securities yields aren't any good - where do you expect the typical bank to keep its excess liquidity??

M3 Funds: U.S. Banking Sector Remains Undercapitalized

At the time this idea was presented, FNB was at $9. Now it's at $7.

Thanks!


On May 08 06:07 PM sethmcs wrote:

> Funny I am up 45% on FNB and want it to go down to buy more. I feel
> the same thing about FNB that Warren Buffett feels about Wells Fargo.
> FNB is a good regional customer oriented bank. I will buy more between
> $6.50 and $7.00 for a long-term dividend investment. I am a very
> satisfied customer of this bank.

Stress Tests: Stressful Enough - And a Waste of Time

"ridiculously overcapitalized"..... you're kidding, right Tom? When is Third Curve Capital coming out?

How TARP Paybacks Expose Weakest Banks

I agree with the main contention of this article - but anyone who didn't already know that BAC and C were two of (if not #1 and #2) weakest banks in the country? If you need the government to tell you which banks are (relatively) strong, and which are at risk of failure, you shouldnt be investing in the sector.

Banks are No Longer Failing

Silly article.

Big banks were failing for different reasons than community banks. The community banks that have failed did so (generally) because they made big bets on real estate in their (confined) market footprint. When things go sour in their local economy, it doesn't take much to drag the bank down. If you don't believe me, ask yourself why we've had clusters of failures in particularly weak geographic areas (GA, FL, etc).

Community banks are no longer failing for two reasons. Either:

1. The government gave them TARP $ to fortify their balance sheets and try to attract deposits or,

2. Because of the tax change regarding NOLs in acquisitions, it is now FAR more attractive to buy a failing franchise than it was prior to the tax code change.