7 Jul, 2023

Cheapest US bank stocks had biggest returns in June

The top market performers in the US banking sector in June were the lowest-valued stocks.

The 208 banks in the S&P Global Market Intelligence analysis recorded a median total return in June of 6.2%, the same as the S&P US BMI Banks index's return. Only 10% of the 208 banks had a negative return, including two banks — Alexandria, Va.-based Burke & Herbert Financial Services Corp. and Hammond, La.-based First Guaranty Bancshares Inc. — with a return below negative 10%.

Customers Bancorp Inc. was the best market performer in the analysis, with a monthly return of 31.5%. The West Reading, Pa.-based bank had the 19th-lowest valuation as of June 30 in terms of price to tangible book value (TBV), adjusted for marks on credit and held-to-maturity securities. At the end of May, Customers Bancorp was the seventh-lowest valued bank. On June 16, its banking unit, Customers Bank, acquired a venture banking loan portfolio, previously held by Signature Bank, from the Federal Deposit Insurance Corp.

PacWest Bancorp had the second-highest total return in June at 26.4%. The Beverly Hills, Calif.-based bank was the fourth-lowest valued company by price to adjusted TBV on May 31 and June 30. In contrast to Customers Bancorp, PacWest continued to shed assets with a lender finance portfolio sale announced June 26.

The third-best market performer was New York-based Metropolitan Bank Holding Corp., with a return of 22.7% in June. It was No. 11 and No. 18 in valuation at May 31 and June 30, respectively. Metropolitan Bank was the second-most shorted US bank stock at the end of May, behind PacWest.

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S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSEAM with total assets of greater than $3 billion as of March 31. The analysis excludes banks with a negative held-to-maturity (HTM) and credit adjusted tangible book value, banks in the mutual holding company ownership structure and other operating subsidiaries.

HTM and credit adjusted tangible book value 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.

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Least expensive banks

Seattle-based HomeStreet Inc. was the cheapest bank in the analysis by price to held-to-maturity and credit adjusted TBV for the third consecutive month. HomeStreet's stock surged 13.0% in June, vaulting its valuation to 20.6% from 18.3% in the preceding month.

SNL Image Click here for S&P Global Market Intelligence's calculations for price to adjusted tangible book value as of June 30.
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Shares in Los Angeles-based RBB Bancorp increased 14.4% in June. RBB Bancorp was the fifth-lowest valued bank at June 30 and May 31. In June, the bank appointed Johnny Lee, who formerly worked at Pasadena, Calif.-based East West Bancorp Inc. unit East West Bank, as president and chief banking officer.

Another bank with a double-digit return in June was Miami Lakes, Fla.-based BankUnited Inc. Its valuation was the 14th-lowest during the last two months. BankUnited cut its collateralized loan obligations by 44.2% in the year ended March 31.

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Most expensive banks

Echoing the previous month's ranking, Abilene, Texas-based First Financial Bankshares Inc. and Dewitt, NY-based Community Bank System Inc. were the two most expensive banks in the analysis, although they swapped ranks in June. First Financial's monthly return was 10.7%, while that of Community Bank System was negative 4.4%.

Truist Financial Corp. was the only other bank on the top 20 valuation list with a negative return in June. More expensive funding is translating to lower projected revenue growth in 2023.

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Largest valuation changes

Bank of Hawaii Corp. had the largest increase between its adjusted and basic price to TBV at about 91 percentage points. In early June, Odeon Capital Group analyst Dick Bove began covering the Honolulu-based bank with a "sell" rating, citing its diminished equity level after fair value adjustments.

Sioux Falls, SD-based Pathward Financial Inc. had the largest valuation decrease, followed by Everett, Wash.-based Coastal Financial Corp. Both companies are banking-as-a-service providers.

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