Whether it was a regional or community bank both common and preferred shares bounced nicely on Wednesday. Of course the market moved sharply higher on debt ceiling hope–and I suppose we will see equities bounce more as that issue is resolved and we can get back to searching for the ‘recession that never arrives’.
A few issues mentioned here early yesterday bounced sharply higher–before I got around to looking for a buy – but I did initiate 1 new position on the VLYPO 5.5% FTF preferred. I wanted to start a small position in a Zion Bancorp issue – either the FTF ZIONO 6.3% preferred or as suggested by Charles and Arbitrage Trader in comments, the ZIONL 6.95% baby bond, but both shot higher and got away from me–oh well more opportunity will come around soon I am sure. With holdings of 6-7 regional/community bankers I will begin to build the positions larger – maybe starting next week – FOMO (fear of missing out) is building.
I see equity futures are up a tiny amount this morning–maybe after yesterdays rally we will pause and look around. The 10 year treasury closed at 3.58% yesterday–so still no real movement in rates over the last week or two–this is bound to change pretty soon.
I will be out of the office a lot today and tomorrow so I won’t post Headlines of Interest tonight
26 thoughts on “Nice Bounces In Banking Issues”
why are ALLY bonds trading at 8%+ yields
They are an 8 billion dollar market cap specializing in consumer loans……Monday Allstate, a 70 billion blue chip insurance company had to pay 7 3/8’s….So for 1/10 the size and perhaps twice the risk where do you think their bonds should be trading? The market tells you what they thinking with the pricing. A lot of paper is over 10 right now……..
I went thru 50 names today and assigned them my take on their strength. Letter grade, A to D…..Ally gets a C in my book.
Ravi, The market has added a risk premium via the pricing.
ALLY issues, many of which are notes, are dragging their knuckles along the bottom of the investment grade rating barrel. Meanwhile, vehicle values are softening and defaults are rising. ALLY’s longest outstanding note with a 2033 maturity carries an S&P junk rating.
I see the ALLY Subordinated 6.7%s of 2033 a BB+ credit priced to yield ~8.6%. Could be a great buy, but I will say that the reason that I am not picking it up is because on any given Friday the stock can tank based on deposit flight and then that Sunday the common, preferred, jr subs and senior unsecured debt can all get zeroed out while uninsured depositors are made whole.
No due process, no bankruptcy court. No clear accounting of why exactly bond holders had to get zeroed. Just an acquirer and a regulator on Zoom calls rushing to get it done before Asian markets open.
I will pass on that. I don’t care how it’s priced.
I haven’t checked recently, but are there any regional banks where the preferred stock is in the single digits per share, but the common is priced way higher, like at least 20-25 a share?
Justin, here is the closest I could come to your request. I did not see any bank preferreds that are still paying out that are trading in single digits. What I did was look at all preferreds that ARE still paying and ranked them by trade price/par price. So a $25 face preferred trading at $10 would be 0.4. Here are the 24 lowest ratioed preferreds, which comes out to be <=0.7.
Format is preferred ticker, close/par, common ticker, common closing price
PACWP, 0.39, PACW, 5.84
WAL-A, 0.56, WAL, 35.18
DCOMP, 0.57, DCOM, 17.41
FHN-F, 0.58, FHN, 10.99
WAFDP, 0.59, WAFD, 26.59
BOH-A, 0.6, BOH, 38.77
CNOBP, 0.6, CNOB, 14.16
OZKAP, 0.61, OZK, 35.49
BWBBP, 0.61, BWB, 9.08
RF-E, 0.61, RF, 16.99
COF-N, 0.62, COF, 99.23
EFSCP, 0.63, EFSC, 40.25
ASB-F, 0.63, ASB, 15.57
VLYPP, 0.63, VLY, 7.58
COF-L, 0.63, COF, 99.23
FULTP, 0.63, FULT, 11.49
USB-Q, 0.64, USB, 30.49
ASB-E, 0.66, ASB, 15.57
SYF-A, 0.66, SYF, 30
WFC-D, 0.68, WFC, 40.21
USB-R, 0.68, USB, 30.49
COF-K, 0.69, COF, 99.23
HBANP, 0.69, HBAN, 10.23
WFC-C, 0.7, WFC, 40.21
Not a surprise that the oft discussed PACWP has the lowest ratio, followed by WAL-A. Rightly or wrongly, I think the market is saying that these have a high probability of either halting payouts and/or going belly up. In aggregate that does not seem rational that ALL of these banks would do one or the other.
We do NOT own any of these in any account.
I’m in good company then. None of the ones I own are on that list.
I like regions…..Not that issue but still. I see their net worth ratio was over 10%. And at their equity size I feel comfortable with them.
TX I’m not sure what protacal is but is ther a way to communicate with you directly about RIA investment services?
PS Ravi, I know some desks are partial to ALly’s floating rate shorter term bonds. I have no idea though, I don’t buy them.
Time to re arrange the chairs
If you prefer, when the great financial crisis happened I told my wife it’s like the game we played as kids. When the music stops and everyone scrambling for chairs there is not enough chairs for everyone playing the game
Mine was a cheap Titanic joke. But yeah so true. I turned somebody’s 200k into 25k on BAC in 08. He called me, no hostility in his voice, “What do we do”? I said double down. There was confusion, they were at airport going to Disney world. His spouse sent in 25.
The 25 went all the way back up so did the other block. But heck with fnm and fne going black anybody could. They closed Wachovia over a weekend. All names a breath away. It was more like fighting for the lifeboats!
Well you got a chuckle out of me, although not sure you’re ready for prime time.
I feel like Tim, would hate to miss a rally. But watching these Bank stocks it looks like a rally feels like a rally but as soon as they rise a 1.00 or 2.00 a selling wave hits and down they go.
You’ve been here before if you Prefer, we have passed the first few innings but still haven’t reached the middle of the game. The Federal reserve sounds pretty serious about another raise in rates. I can wait a couple weeks
Just too many icebergs out there to run into
I did sell one on the close today. One I bought last week. I thought I had a limit order and it went off at the top of the ask. So selling git me back in balance…. Many go ex 5/30 put still was up over a dollar and still have a good weighting. I feel like Gbird Omg I traded one. I don’t do that.
As I said I made out a list of top issuers and assigned a letter rating A to D. I mean we have 7’s under 22? Helps keep me weighted properly. Buy a C or D? Maybe but not an overweight
If you Prefer, what are your guidelines for the ABC grading your assigning to the bank stocks your looking at? I would assume you add a point or two for the yield on investment? I felt safe on a couple that are yielding 6% to open a position in.
It’s based on my sophisticated wild arse guess.
History of company… age does count, credit rating, common stock price pattern, credit rating, Thompson, IBD, industry, size of the company market cap, history shareholder consideration, and as you can imagine, what I think of their reputation. For instance when PSA screwed PSB shareholders many took notice. Fool us once…..
If a common stock is in a hard drop… A death chart… The risk escalates for all their related cusips. And you have to carefully consider where/how well the issue is trading. There are a few names that for the life of me I can’t figure why they are so high priced/low yielding.
Mcreits seem to be very well priced, for instance. What gets me is I always placed them as C or D or not rated. Many are holding up better then my Bor C financials.!!
Funny IYP I feel that same way about MREIT’s.
Don’t know if it was you or another person on here, but I liked their comment about they stay away from preferred that has a higher price than the common. But then I wouldn’t be holding NYCB U
I am not a technical chart guy, but I look over the past 6 months to a year and see how steady a stock has been and look for the drops. I average the lows and hang a low ball bid out there maybe just above the 52 week low. I don’t expect to catch the lowest price but if I get it and it goes lower I average down.
Banks have a built-in advantage, Make risky bets, if they win they keep the money if they lose you bail them out. When the market is on the edge of a cliff we have the same advantage to a lesser extent. If the economy recovers you make a profit, if it dies you lose no matter what you do.
Every once in a while the sun shines before the storm clouds close in. I just bought UBP-PK 2 days ago. Now am I going to have everyone panic and cry the sky is falling and REG is going to de-list the preferred and let it go dark? Next thing I know everyone is selling and tanks the stock 🙁
But- it’s up over 19% now, & H over 15% …. News?
oops- missed all the comments
I’ve held ubp preferreds for 5 yrs. I cost avg’d down to 21.33 over the yrs. Now they selling it, and I’m out @ 24.12. There might be blood left in the stone but Smitty don’t mess with buyouts.
Thanks to everyone on this site who contributes vital info. Appreciate it
I’d just sell that on the news if I just bought it. Risk of an event thru horse trading in backrooms….yeah it could go to 25….not worth it for me, SELL……But…..I did hear about the deal on 101.5 yesterday and wondered who was getting bought out. I see it’s Urstadt and Biddle!. Good for them, that arena (malls) is sketchy at best
REG is going to buy UBP. Preferred stocks shot up.
FYI Iskren, This should be posted in reader initiated alerts, But then I read it here first. Thank You