Investors seek increased disclosures from banks amid failures, liquidity crunch

The recent market turmoil spurred by bank failures and liquidity concerns has investors eager for increased disclosures from banks.

On a webinar hosted by Clark Street Capital, Christopher Marinac, director of research at Janney Montgomery Scott, discussed areas bank investors will require more disclosures on starting now or by first-quarter earnings releases in April in light of recent market turmoil that has raised questions about banks' liquidity.

Marinac pointed to seven areas investors want more details from banks on, including deposit details, such as uninsured deposits and customer sizes; customer concentrations; liquidity immediately available compared to contingent liquidity sources; deposit pricing; loans by collateral and commercial real estate portfolio details; unrealized losses on securities and other mark-to-market data; and credit quality and criticized asset basics.

"Some of those disclosures are gonna go back to deposits. What is uninsured? What is [Federal Deposit Insurance Corp.]-insured? What are your deposit concentrations? We're gonna get real granular, real fast on deposits," Marinac said during the March 22 webinar.

Following the failures of Silicon Valley Bank, a subsidiary of SVB Financial Group, and Signature Bank, and with the liquidity crunch, "everything has changed from the financial community," Marinac said. "We look at the world differently than we did and part of it is capital."

There will be more discussions about the securities banks hold. An understanding of "where the natural interest rate marks are at March 31" and a better understanding of amortization will enable banks to talk about "what our true hole is" capital-wise, according to Marinac.

"And then we can address whether banks have to raise or simply earn through the cycle to cover that difference," Marinac said.

Investors will also look for granular detail on asset quality, and specifically seek details on CRE portfolios. Loans in areas such as office, industrial, retail, hotel and multifamily "must be clear," according to Marinac's presentation. "Investors who want to worry about office should have details easy to access."