5 Jun, 2024
Merger target HomeStreet was cheapest US bank at end of May
By Robert Clark
With the stock plunge in May, HomeStreet Inc. again became the cheapest US bank stock in S&P Global Market Intelligence's analysis. Seattle-based HomeStreet had been the lowest-valued bank in January and from April 2023 through November 2023.
Homestreet on Jan. 16 announced a deal with Denver-based FirstSun Capital Bancorp. After the markets closed April 30, the companies disclosed an amended merger agreement featuring a lower exchange ratio for HomeStreet shareholders.
HomeStreet's stock price declined more than 10% the next day. The downward trend continued in May, and the bank ended the month with a total return of negative 25.5%, the weakest market performance among the 207 banks in the analysis. As of May 31, HomeStreet traded at 34.1% of adjusted tangible book value (TBV), down from 45.7% at the end of April.
S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of greater than $3 billion. The analysis excludes banks in the mutual holding company ownership structure and other operating subsidiaries.
Held-to-maturity and credit-adjusted TBV is calculated as the sum of tangible common equity, unrealized gain or loss from held-to-maturity 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
Hicksville, NY-based New York Community Bancorp Inc., which had been the cheapest US bank stock in March and April, fell to No. 2 in the valuation ranking as of May 31. Its monthly return of 24.2% was second-best in the analysis and pulled up the bank's price to adjusted TBV to 34.4%, slightly above HomeStreet's valuation.
Like several banks with a high proportion of multifamily loans to gross loans, New York Community reduced its exposure in the first quarter and undertook another step to downsize its balance sheet and improve liquidity.
On May 14, New York Community announced the sale of approximately $5 billion of mortgage warehouse loans to JPMorgan Chase Bank NA. New York Community expects the transaction to add 65 basis points to its common equity Tier 1 capital ratio, resulting in a pro-forma common equity Tier 1 ratio of 10.8% as of March 31.
New York Community also announced the resignation of its COO last month.
Blue Ridge Bankshares Inc., which had not been part of the April analysis because of unavailable financial data, slotted in at No. 3 with a valuation of 36.5%. The Charlottesville, Va.-based bank completed a $150 million capital raise April 3.
Blue Ridge Bankshares has lost money for four consecutive quarters, with margin compression a contributing factor to the losing streak. Its first-quarter net interest margin of 2.75% represented a 55-basis-point decline year over year and was the lowest in the last decade.
Dallas-based First Foundation Inc. rounded out the group of four banks with a price to adjusted TBV below 40%. It is one of the largest US banks exceeding regulatory guidance for commercial real estate concentration and growth.
Most expensive banks
Abilene, Texas-based First Financial Bankshares Inc. was the highest-valued bank in the analysis by price to adjusted TBV for the fourth month in a row. As of May 31, its valuation was 348.3%, up from 343.4% at the end of April.
Bank of Hawaii Corp., the fourth-most expensive bank, had the biggest change between its price to basic TBV and its price to adjusted TBV: an increase of 132.2 percentage points. The Honolulu-based bank filed a mixed shelf registration statement May 10.
The ninth-most expensive bank, JPMorgan Chase & Co., increased its net interest income guidance for 2024. JPMorgan surpassed the $4 trillion total-asset level in the first quarter, extending its lead as the largest US bank.
Ontario, Calif.-based CVB Financial Corp., ranked No. 16, has been one of the most active users of the Bank Term Funding Program (BTFP). As of March 31, its BTFP borrowings totaled about $2 billion and comprised 13.9% of total liabilities.
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– Access S&P Global Market Intelligence's calculations for price-to-adjusted tangible book value as of May 31, 2024 |
