US bank valuations fall to 4-month low in September

For the second month in a row, the US banking sector experienced broad-based selling pressure, which pushed valuations down to their lowest level since May.

The median price to adjusted tangible book value (TBV) for the 211 banks in the S&P Global Market Intelligence analysis was 113.6% at Sept. 29, down from 119.7% at the end of August and 129.5% at the end of July. Thirteen of the banks registered a positive total return in September, including one with a double-digit percentage return: Cambridge, Mass.-based Cambridge Bancorp, which announced a sale to Boston-based Eastern Bankshares Inc. on Sept. 19. In contrast, 21 of the banks had a double-digit percentage loss.

S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of greater than $3 billion as of the most recent quarter. The analysis excludes banks with a negative held-to-maturity (HTM) and credit-adjusted TBV, banks in the mutual holding company ownership structure and other operating subsidiaries.

HTM and credit-adjusted TBV is calculated as the sum of tangible common equity; unrealized gain or loss from HTM securities, tax-adjusted at the 21% corporate rate; and loss reserves; less nonperforming assets and loans 90 or more days past due but still accruing interest; divided by common shares outstanding.

Least expensive banks

For the sixth consecutive month, Seattle-based HomeStreet Inc. traded at the lowest price to adjusted TBV in the analysis. A monthly return of negative 17.6% dragged the bank's valuation to 28.9% at Sept. 29 from 35.1% at Aug. 31.

Activist investor Blue Lion Capital has called for HomeStreet to sell its Fannie Mae delegated underwriting and servicing (DUS) business, projecting a deal value of at least $100 million. HomeStreet disclosed on Sept. 22 that a week prior, it received a $57 million unsolicited nonbinding proposal for the business from a third-party group.

In HomeStreet's response to Blue Lion Capital letters to shareholders, HomeStreet Chairman, President and CEO Mark Mason said, "Our Board of Directors and management have analyzed the DUS Purchase Proposal and determined that the price proposed was inadequate in relation to the resulting benefit and value of the DUS Business to our Company and as such a sale of our DUS Business at this price was not in the best interests of the Company."

With a negative 42.9% return in September, Blue Ridge Bankshares Inc. was the weakest market performer in the analysis. The negative momentum carried into October, with the shares declining another 29.2% on the first trading day of the month. At the end of September, the Charlottesville, Va.-based bank traded at 54.9% of adjusted TBV, ranking the sixth lowest. Blue Ridge, which is under a written agreement entered into with the Office of the Comptroller of the Currency in 2022, recently brought in a new CEO.

The No. 7 institution in the list of least expensive banks, Los Angeles-based RBB Bancorp, announced on Sept. 28 the termination of its planned acquisition of Oakland, Calif.-based Gateway Bank FSB.

The No. 10 bank, Bethesda, Md.-based Eagle Bancorp Inc., announced separate CFOs for its holding company and bank subsidiary.

– Access S&P Global Market Intelligence's calculations for price to adjusted tangible book value as of Sept. 29. – Read some of the day's top news and insights from S&P Global Market Intelligence. – Set email alerts for future Data Dispatch articles.

Most expensive banks

Like the previous six months, Abilene, Texas-based First Financial Bankshares Inc. and Dewitt, NY-based Community Bank System Inc. were the two highest-valued banks in the analysis. Both companies traded down more than 10.0% in September.

Honolulu-based Bank of Hawaii Corp. ranked No. 4 in the list of banks with the highest price to adjusted TBV ratios at the end of September. In August, it was the most shorted US bank stock.

The largest US bank by total assets, JPMorgan Chase & Co., slotted in as the 20th-highest valued institution in the analysis. Its stock held up relatively well last month, trading down less than 1%.