Street Talk: Recent Episodes
Nathan Stovall | S&P Global Market Intelligence
S&P Global Market Intelligence principal analyst Nathan Stovall takes a deep dive into issues facing financial institutions and the investment community. Tune in for interviews with industry insiders as well as brief outlooks for the banking sector.
Bank advisers and market participants at S&P Global Market Intelligence’s annual community bankers conference said bank M&A and IPO activity is in a holding pattern and will pick up once there is greater clarity over the macroeconomic and interest rate environment. They also suggested that banks should avoid trying to position their balance sheets for particular rate moves and instead prepare for a variety of scenarios. The episode highlights balance sheet strategies, the current regulatory environment and the outlook for bank deal activity from experts at Piper Sandler, Darling Consulting, Alston & Bird, Stephens, KSK Investors and Hovde Group.
The emergence of tariffs led to a broad selloff of US banks amid fears of slower economic growth or even a possible recession. Banks’ first-quarter earnings season showed strong performance before the onset of tariffs, but ultimately might have left investors with more questions than answers. In the episode, senior reporter Harry Terris shared the key takeaways from large banks’ first-quarter results and highlighted commentary from JPMorgan, Bank of America, Capital One, First Citizens and others. The results show a noticeable divide between "hard" data, such as consumer spending strength, and "soft" data, like stock market volatility and economic forecasts. Despite the uncertainties, major banks have largely maintained their financial guidance. However, they have adjusted loan growth expectations downward due to a more cautious approach from clients, reflecting a "wait and see" attitude amid the current economic climate. Bank news lead Lauren Seay further discussed how tariffs are expected to negatively impact M&A activity, but also notes that the trade policies have not completely stymied bank deals, with large transactions like Columbia Bank’s plans to purchase Pacific Premier surfacing since tariffs were announced.
Each year, S&P Global Market Intelligence ranks top-performing financial institutions in the following categories: community banks $3 billion to $10 billion in assets, community banks with less than $3 billion in assets, credit unions will more than $100 million in assets, and the top largest U.S. public banks by total assets. In another installment of Tales from Top Performers, executives from two winners of the community bank rankings – Nicolet Bankshares CFO Phil Moore and Northeast Community Bank Chairman and CEO Ken Martinek – share what differentiates their franchises and how they have outperformed peers. They also discussed the greatest challenges and opportunities they see over the next 12 months, both organically and through M&A activity.
Activist investor John Palmer sees plenty of catalysts for bank stocks, including stronger fundamentals, attractive valuations and a resurgence in M&A activity among regional and community banks. In the episode, Palmer, principal and managing member at PL Capital, discussed his firm’s investment approach, its successful history in running proxy campaigns and how its interactions with bank management teams have changed over time. The veteran investor also shared how PL Capital has encouraged change and offered value to management teams as well as his view on the need for scale at some banks, M&A activity, regulation and bank valuations.
The bank advisory community is optimistic that bank M&A activity will rebound in 2025 and they should be, according to Mercer Capital Managing Director Jeff Davis. In the episode, Davis discussed his takeaways from the annual Acquire or Be Acquired Conference, where scores of advisers shared their viewed for M&A activity to be materially stronger this year. Davis also discussed the improving fundamental environment for banks, the outlook for bank valuations and whether institutions should take advantage of the current optionality in the marketplace and pursue capital raises or acquisitions while the window remains open.
Investors have flocked back to the bank group over the last five months as the fundamental environment has improved and the election results in November added legs to the rally, according to KBW CEO Tom Michaud. In the episode, Michaud discussed improving investor sentiment toward the U.S. bank space, his firm’s expectation for banks’ earnings and credit quality in 2025 and 2026, and the outlook for capital raising and bank M&A activity.
The bank M&A pipeline has improved significantly over the past month, and capital is available for institutions looking to grow amid the surge in investor interest in the banking sector, according to Bill Burgess, co-head of financial services investment banking at Piper Sandler. In the episode, Burgess said there are six factors contributing to renewed interest in bank deals, particularly following the recent U.S. elections. He noted that there is pent-up demand for deals after years of stagnation, a rally in bank stock prices has improved seller psychology, and interest rate marks have become more manageable for buyers. He anticipates a shorter regulatory approval process for bank deals and believes larger buyers could return to the M&A arena after getting more clarity on the post-election regulatory framework. Burgess also said capital is abundant for event-driven and growth stories but cautioned against an overly aggressive push for capital issuance driven by rising share prices.
The U.S. election could change the legislative, supervisory and regulatory framework for the banking industry. In the episode, we discuss what different election outcomes could mean for banks with three guests focused on policy, regulation and rulemaking: Paul Merski, executive vice president, congressional relations and strategy at the Independent Community Bankers of America; Naomi Camper, chief policy officer at the American Bankers Association; and Isaac Boltansky, managing director and director of policy research at BTIG. The group outlined the current regulatory framework under the Biden administration and how it has differed from the Trump administration. The panelists agreed that a Harris presidency could be seen as a continuation of the existing regulatory framework and noted that a Trump victory could lead to significant regulatory shifts, particularly around consumer issues, fintech and bank M&A activity. But, they also noted that both candidates have shared populist views, creating a horseshoe effect of the ideological specturm.
The operating environment remains challenging for many banks but experts at Raymond James’ annual whole loan conference in September 2024 noted there is a growing acceptance and willingness to pursue deals to counter headwinds facing the group. In the episode, three veterans at Raymond James – John Toohig, head of whole loan trading; Bill Sammon, head of financial services capital markets; and Bob Toma, managing director in financial services investment banking – discussed the outlook for bank earnings, the heath of the consumer, the threat from institutions’ exposure to commercial real estate and the impact of lower rates on future performance. The group also discussed how the fundamental environment will impact sentiment among investors and bank boards, the recent rebound in M&A and capital raising activity, and the potential for more deals, including securitizations that help banks derisk their balance sheets.
Rate hikes by the Federal Reserve and changes in post-pandemic behavior have put pressure on commercial real estate (CRE) borrowers needing to refinance loans coming due. The tally is nothing to sneeze at, with approximately $950 billion in CRE mortgages set to mature in 2024, according to S&P Global Market Intelligence's analysis of nationwide property records. In the episode, S&P Global Market Intelligence analysts Tom Mason, Chris Hudgins and Zain Tariq discuss the threat of maturing CRE mortgages and what portion of those loans are in the troubled office sector. The trio also outlined differences in valuations across different CRE categories, the potential read through provided by the publicly traded REIT sector, and how banks are managing their CRE exposures and reacting to regulatory and investor scrutiny into the asset class.
Bank stocks and regional bank stocks in particular have rallied over the last month and there is further room to run, according to Joe Fenech, Chief Investment Officer at GenOpp Capital Management. In the episode, recorded on July 16, Fenech said that sentiment towards bank stocks is improving and that the long bear market in bank stocks ended in May 2023. The investor argued that the recapitalization of New York Community Bancorp earlier in 2024 could serve as the turning point of this investment cycle now that “smart money” has rescued one of the sector’s biggest problems. He also sees net interest margin pressure easing and eventually becoming a tailwind for banks and argued that not all commercial real estate (CRE) loans should be seen as high risk and resulting in sizable losses. He also believes M&A activity will increase, driven by succession issues and the need for scale and technology investment.
Tales from Top Performers features conversations with executives at high-performing banks about their view of current issues, and the greatest challenges and opportunities they see ahead. This episode features executives from three of the highest performing banks in the country: Curtis Griffith, chairman and CEO of Lubbock, Texas-based South Plains Financial; Paul Egge, CFO of Houston-based Stellar Bancorp; and Skip Hageboeck, CEO of Charleston, W. Va.-based City Holding Co. The bankers outlined how they've been able to maintain strong deposit franchises in the face of fierce competition, their outlook for loan growth and credit quality, and the greatest challenges and opportunities they see over the next year.
Deposits and liquidity remain at the forefront for most bankers and the intense competition for core funding will eventually lead to a resurgence in M&A activity. That was the message delivered by a variety of presenters at S&P Global Market Intelligence’s annual community bankers conference on May 20 and 21, but they acknowledged that transactions face some challenges in the near term, including lower valuations, fewer would-be buyers and regulatory pressures that tend to require more capital in deals. The episode features commentary from banking experts at Ampersand, Curinos, StoneCastle Partners, Performance Trust Capital Partners, Fenimore Kay Harrison, Stephens, Janney Montgomery Scott, Piper Sandler and Klaros Capital.
The investment community has expressed great concern over commercial real estate and questioned whether a severe downturn could lie on the horizon, but Rich Hill, head of real estate strategy and research at Cohen & Steers, is not in the camp.
In the episode, Hill discussed the misconceptions about commercial real estate, the considerable differences in risk across varies subcategories and how publicly traded REITs serve as a leading indicator to the private markets. The veteran of the real estate space further argued that the current cycle is very different than the global financial crisis and could represent the greatest opportunity to invest new capital in a generation.
Tales from Top Performers is a new series under the Street Talk banner that will feature conversations with executives at high-performing banks about their bank and experience in the sector; their view of current issues, and the greatest challenges and opportunities they see ahead. The inaugural episode features a discussion between James Beckwith, CEO of Rancho Cordova, Calif-based Five Star Bancorp, a previous winner of S&P's Global Market Intelligence's annual bank rankings, and S&P co-hosts Nathan Stovall, director of financial institutions research, and Jimmy Pittenger, who oversees the firm's US financial institutions commercial team. In the episode, Beckwith discusses how he got into banking, what he loves about the industry, how his institution has built an attractive deposit franchise and managed elevated exposure to commercial real estate, and his view on the greatest challenges and opportunities ahead.
The banks that failed in the spring of 2023 were outliers that violated some of the golden rules of banking, but many investors continue to unfairly paint the bank group with a broad brush, according to KBW CEO Tom Michaud. In the episode, Michaud discussed the drivers of the large bank failures in 2023 and the idiosyncrasies of those institutions. He further discussed the regulatory response to the liquidity crunch and criticized the Basel III endgame proposal while advocating for deposit insurance reform. The executive also noted that investors continue to treat all banks the same and express concern over their commercial real estate exposures but noted that most of the industry faces an earnings issue rather than a threat to safety and soundness.
Regulatory scrutiny has intensified in the aftermath of the liquidity crunch that erupted in 2023 and could play an even larger role in bank M&A activity in 2024 by motivating more banks to consider selling, while also standing in the way of some transactions. The episode features views presented by advisers at Hovde Group, KBW and Luse Gorman at the Acquire or Be Acquired conference, commentary from executives at Community Bank System and Columbia Banking System on the current state of bank M&A, and some discussion of the unfolding situation at the New York Community Bancorp.
U.S. banks’ fourth-quarter 2023 earnings demonstrated continued pressure on funding costs and minimal slippage in credit quality. The Street largely took the results in stride, but management teams were hopeful that net interest margin pressure could subside in the second half of 2024 and credit quality would hold up in the face of a higher for longer rate environment, according to Gerard Cassidy, co-head of global financials research at RBC Capital Markets. In the episode, the veteran analyst said he shares that optimistic outlook and believes the current environment is more similar to 1995 when the U.S. economy digested sharp rate hikes by the Federal Reserve and likely will not result in a severe downturn like some investors fear. Cassidy believes bank stocks are a show me story but does see further catalysts on the horizon. The analyst also offered his outlook for bank M&A activity.
The word unprecedented became commonplace in banking circles in 2023. The Federal Reserve’s rate hike campaign pushed bank balance sheets deeply underwater, spurred deposit outflows and exposed asset/liability mismatches at some institutions that culminated in record-breaking bank runs that led to the second, third and fourth largest bank failures in US history. Those closures and the liquidity crunch, regulatory response, market selloff and eventual recovery that followed changed the competitive landscape and the way bank observers view the industry. This episode features commentary from experts at BTIG, Davis Polk, Janney Montgomery Scott, KBW, Luse Gorman, Piper Sandler and others on the lessons learned from the liquidity crunch, the fallout afterward and the potential opportunities that lie ahead.
Bank stocks have rallied since the Federal Reserve offered hopes of rate cuts in 2024 and there are further catalysts on the horizon, including a pickup in M&A activity, according to Mendon Capital Advisors President Anton Schutz. In the episode, the veteran bank stock investor offered his view of bank stock valuations, credit quality, bond portfolio restructurings and increased M&A activity on the horizon, through both mergers of equals and traditional buyouts.
The negative impact from higher interest rates has led a number of banks to considering balance sheet restructurings and a few institutions have pursued those transactions by unlocking capital through sales of business lines or merging with another company, according to Bill Burgess, co-head of financial services investment banking at Piper Sandler. In the episode, Burgess discussed the current roadblocks to M&A activity, various transactions banks have pursued to facilite transactions, the prospect of further deals on the horizon and the potential for increased private equity investing in the bank space.
As community banks face a challenging operating environment due to higher for longer rates and heightened regulatory scrutiny, Tony Scavuzzo, managing principal at Castle Creek Capital, expects private equity investing in the sector to increase. In the episode, the private equity veteran said he expects new investments to support independent banks looking to play offense and purge underwater bonds or credit risk in their loan portfolios as well as capital being provided to help facilitate bank M&A activity.
Many bank boards are stuck as they face investor scrutiny and wait for slippage in credit quality, but experts at Raymond James’ inaugural whole loan conference noted that private equity firms are waiting to infuse capital into institutions so they can play offense in the future.In the episode, John Toohig, head of whole loan trading at Raymond James and host of the firm’s recent conference, discussed the outlook that speakers shared for the economy and the credit quality of mortgages, credit cards and commercial real estate. Toohig also shared how depositories and their boards are reacting to the higher for longer rate environment, the current gap between buyers and sellers in the secondary loan market, and investor appetite to support bank M&A and loss trades in institutions’ bond and loan portfolios.
In the latest Street Talk podcast, Davis Polk Partner David Portilla says implementing early remediation triggers outlined in the Dodd-Frank Act would be more effective than the Basel III endgame to avoid repeating the spring 2023 bank failures. In the episode, Portilla made the case for enacting early remediation triggers proposed in section 166 of the Dodd-Frank Act. That provision directed the Fed to adopt regulations for the early remediation of financial weakness. The Fed outlined four different levels under an early remediation framework, but never implemented the rules.
Banc of California Inc.'s plans to acquire PacWest Bancorp the largest bank deal thus far of 2023, offers some hope that a rebound in bank M&A could be on the horizon, but advisers acknowledged that the unique nature of the transaction makes it stand apart. In the latest Street Talk podcast, members of the S&P Global Market Intelligence news team highlight discussions with bank deal advisers, including senior members from Janney Montgomery Scott and Troutman Pepper Hamilton Sanders LLP. The advisers, both investment bankers and attorneys, discussed whether the deal will pass regulatory muster, the potential for further private equity involvement in the bank space and the outlook for bank M&A activity.
Many regional banks’ second-quarter earnings might have fallen short of the Street’s estimates, but results contradicted the bear case that weighed heavily on the institutions’ stock prices during the spring, according to Terry McEvoy, managing director at Stephens. In the episode recorded on July 24, McEvoy, the superregional bank analyst at Stephens, discussed the key takeaways from the first week of regional bank earnings and what results tell the investment community about banks’ liquidity, credit quality and valuations.
The liquidity crunch that erupted in March made deposits more precious, but performance has diverged between institutions of different sizes and regions, according to Josh Siegel, chairman and CEO of StoneCastle Partners.
In the episode, Siegel discussed the liquidity pressures facing the industry and how they far more acute for regional banks than the nation’s largest and smallest banks; strategies institutions are employing to compete for deposits; potential regulatory changes; the outlook for capital raising activity and the risk posed by commercial real estate.
While many banks are being unfairly painted with a broad brush, institutions will face tougher regulatory examinations and pressure on probability and that should ultimately lead to a strong rebound in bank M&A activity.
Those views were delivered by members of the investment and advisory community during two panel discussions focused on bank liquidity that S&P Global Market Intelligence hosted on May 18. The panels featured Ben Azoff, partner at Luse Gorman; Isaac Boltansky, director of policy research at BTIG; Bill Burgess, co-head of financial services investment banking at Piper Sandler; Greg Hertrich, head of U.S. depository strategies at Nomura; Jonah Marcus, partner and portfolio manager at Endeavour Capital; and Chris McGratty, head of US bank research at KBW. In the episode, we discuss the highlights of the panels with fellow moderator, Joe Mantone, the head of S&P Global Market Intelligence’s US FIG News team and the host of The Pipeline: M&A and IPO Insights. The panelists offered their view of bank valuations, whether institutions should consider repositioning bond portfolios, takeaways from recent regulatory examinations and the outlook for M&A activity. Click below to access The Pipeline.
https://podcasts.apple.com/us/podcast/the-pipeline-m-a-and-ipo-insights/id1670488947
Brad Rinschler, managing partner at Down Range Capital Management, said in the latest "Street Talk" podcast that he believes valuations of many banks are attractive. In the episode, Rinschler and Connor Labozzetta, a partner at Down Range, discussed year-to-date performance of bank stocks, why they think failed institutions were not representative of many banks, the opportunity they see to invest at current levels and their favorite banks to own.
Bearish investors are targeting bank stocks and ignoring the facts, according to Janney Montgomery Scott Director of Research Chris Marinac. In the episode, Marinac discussed the fallout from recent bank failures and the recent, sharp selloff in bank stocks. He said bearish investors are using banks as a “weapon of destruction” to try to force the Federal Reserve’s hand to either cut interest rates, consider a “blanket” deposit insurance alternative for banks or unveil a program that would support equity investors and the capital markets. He further noted that investors fail to recognize that even if bank earnings are weaker due to net interest margin pressure, they will be sufficient to cover substantial loan losses should they arise.
The liquidity crunch that emerged at a few institutions in March sent fears through the market and battered bank stocks but the selloff has left some trophy franchises on sale, according to KBW CEO Tom Michaud. In the latest Street Talk podcast, KBW CEO Tom Michaud discussed the liquidity crunch that emerged in March and battered bank stocks and offered his view on current valuations, bank liquidity levels, potential regulatory changes and M&A activity.
Economists had hopes that the Federal Reserve could achieve a soft landing as it worked to tame inflation but that prospect could be harder in light of the liquidity crunch facing the U.S. banking industry. In the episode, S&P Global Market Intelligence's news team highlights interviews with investors, analysts and economists say that the Fed remains laser-focused on reducing inflation and the latest jobs report and consumer price index reading provide further support for additional tightening. They also say that expectations of a U.S. recession remain high, but falling inflation and surprising economic strength signal calming inflation without a significant economic downturn.
Higher rates have put deposits under pressure across the banking industry, but liquidity strains have been far more pronounced at a few banks, resulting in severe hits to their stock prices. Crypto-focused bank Silvergate announced plans to voluntarily wind down its operations after facing a liquidity crunch, but others like SVB Financial raised capital and purged its bond portfolio after seeing a higher cash burn among its clients. In the episode, Todd Baker, a senior fellow at the Richman Center for Business, Law and Public Policy at Columbia Business School and Colombia Law School, discussed the recent liquidity crunch at Silvergate, the asset/liability management lessons observers can learn from the turmoil and the risk that banks face when focusing on a given industry. Baker, who previously served as the chief corporate strategy and development officer at three large banks, also provided insight into the unfolding situation at SVB Financial.
As deposit competition intensifies, banks should consider slowing or even stopping growing to mitigate credit risk and threats to their net interest margins, according to South State Bank Director of Capital Markets Chris Nichols. The episode features a discussion on the pitfalls of competing for deposits just with rates and why banks should rethink their growth goals at this point in the interest rate and credit cycle between Nichols and S&P Global Market Intelligence co-hosts Nathan Stovall, director of financial institutions research, and Maureen McKenna, who oversees the firm's commercial bank solutions and community bankers conference. Visit this site for more information about the conference. https://www.spglobal.com/marketintelligence/en/events/in-person/community-bankers-conference-23
An unforgiving stock market and declining cash reserves at startups should lead to a wave of U.S. fintech industry consolidation in 2023. Some companies will survive, but many others will throw in the towel or sell their operations at a significant discount to their peak valuations, according to Tom Mason, senior research analyst at S&P Global Market Intelligence. In the episode, Mason discussed the outlook for the banking tech space and what changes to the operating model could mean for independents and traditional banks they're looking to disrupt.
Bank M&A activity fell considerably in 2022 but the push to obtain core deposits should encourage a steady stream of deals in 2023 as funding becomes more precious. In the episode, Bill Burgess, co-head of financial services investment banking at Piper Sandler said he is bullish that roughly 200 transactions could surface in 2023, up nearly 20% from 2022 levels as more and more acquirers seek to bolster their deposit base through M&A, particularly with core deposit premiums at near decade lows.
A spike in interest rates has created large amounts of unrealized losses sitting in banks' bond portfolios and sparked liquidity concerns in the investment community, according to Brett Rabatin, director of research at Hovde Group. In the episode, Rabatin discussed the merits of investors' concerns and the impact that deeply underwater bonds have on banks' liquidity, earnings, valuations and potential regulatory constraints on capital returns.
The slowdown in bank dealmaking in 2022 could reverse course in 2023 as institutions gain greater clarity over emerging liquidity and credit pressures and the regulatory environment, according to some of the most active investment bankers and attorneys focused on deals in bankland. The group, which featured the heads of investment banking from Keefe Bruyette & Woods and Piper Sandler and veteran attorneys from Sullivan & Cromwell, delivered that message during a recent webinar hosted by S&P Global Market Intelligence. The episode features highlights from that discussion, where the advisers said that transactions — either in the form of whole bank acquisitions or capital raises that bolster balance sheets — could pick up next year as banks gain a better understanding of the regulatory environment, liquidity pressures and the potential for notably for higher loan losses.
Access the full webinar here:
https://pages.marketintelligence.spglobal.com/Bank-M-A-Outlook-When-Will-the-Cool-Front-End-Registration-October-2022.html?utm_source=ON24reg
After explosive growth that outperformed the rest of the industry's historic growth in 2021, Northwestern Mutual believes its long-term approach, digital investments to complement its financial advisor salesforce and focus on diversity and inclusion will allow the company to stand out against other life insurers, wealth managers and the biggest banks.
In the episode, Michael Carter, executive vice president, CFO and chief risk officer at Northwestern Mutual, discussed the drivers of the historic growth for the life insurance industry, competition with insurtechs, the impact of higher interest rates on the company’s investment portfolio, including its commercial real estate exposures, and its focus on diversity and inclusion.
Higher interest rates promise stronger net interest income for the banking industry, but bank stocks are trading at discounted prices because investors are concerned about potential threats to bank liquidity and credit quality, according to KBW CEO Tom Michaud. In the episode, Michaud discussed current bank stock valuations, the impact of higher rates on deposits, liquidity and credit quality, and how those factors are affecting M&A activity.
The Federal Reserve's aggressive tightening of monetary policy has pushed bank bond portfolios deep into negative territory, altered previously struck bank M&A deals and has given pause to some would-be buyers. In the episode, bankers and advisers from Piper Sandler's depository investment bank team and PNC's Financial Institutions Advisory Group discuss how higher rates have negatively impacted bank deal math, tangible book value and changed the way acquirers communicate with the Street. S&P Global Market Intelligence Banking Reporter Lauren Seay highlights discussions with bankers and advisers as well as earnings call commentary from several seasoned acquirers, including Home BancShares, Seacoast Banking Corp., Community Bank System and Provident Financial.
While deal discussions continue and community banks still see acquisitions as an attractive tool for growth, regulatory headwinds have made M&A a little less attractive for growth-mind companies. In the episode, Jonathan Hightower, partner at Fenimore Kay Harrison LLP, discussed the drivers of community bank M&A activity, the impact of rising rates on transactions, how most community banks already satisfy environmental, social and governance considerations and the changing regulatory landscape for community banks, including the agencies' views of deals.
Large banks' second-quarter results likely helped downplay recessionary fears but many investors will remain on the sidelines until it is clear that a severe recession is not on the horizon, according to Gerard Cassidy. In the episode, Cassidy, managing director and head of U.S. Bank Equity Strategy at RBC Capital Markets, discussed banks' second-quarter results, how institutions' deposit bases are reacting to rate hikes by the Federal Reserve, and what results suggest about the health of the US economy.
The Fed has committed to taming elevated inflation by tightening monetary at a rapid pace, stoking fears that the central bank will not be able to achieve a "soft landing" for the U.S. economy. In the episode, S&P Global Market Intelligence's news team highlights interviews with investors, analysts and economists who say that a recession is a real possibility in 2023 and that small businesses and households with lower incomes, in particular, could feel some pain if that occurred. But the members of the investment community also suggested that large corporates, consumers and banks have strong enough balance sheets to weather a storm — possibly even a "hurricane" — should it emerge.
The current economic headwinds might seem like a "hurricane" on the horizon to some, but advisers and bankers at S&P Global Market Intelligence annual community bankers' conference said institutions could navigate choppy waters.
In the latest Street Talk podcast, we share the advice that bankers, advisers and investors offered at the event, including on how to prepare for unprecedented changes in rates and how to accelerate growth through recruitment, incentives and fintech partnerships. Conference participants also offered their view of the potential market opportunity and risks from fintech partnerships as well as their view of current bank stock valuations and the economic environment.
While recessionary fears have grown on the Street, S&P Global Ratings U.S. Chief Economist Beth Ann Bovino does not see a downturn developing this year. In the episode, the economist discussed her outlook for the U.S. economy and inflation, the possibility of a wage spiral and the Federal Reserve's plans to wind down its nearly $9 trillion balance sheet. She also discussed how the Fed likely will tighten monetary policy too much in their effort to get inflation under control and the likelihood of a recession occurring as the central bank tries to initiate a soft landing.
While most banks are positioned for higher rates, institutions might be wise to consider the possibility that rates could turn the other way in the future, according to Darling Consulting Group President and CEO Matt Pieniazek. In the episode, Pieniazek discussed balance sheet positioning ahead of the rate hike cycle, the potential for securities portfolios to move further underwater as rates move higher, and how banks should evaluate how sensitive their deposit bases will be to the Fed's tightening cycle.
After a busy year for dealmaking, Citizens Financial Group sees more opportunities for organic growth going forward, including through its digital bank where it plans to offer more consumer loan products, according to the company's Chairman and CEO Bruce Van Saun. In the episode, Van Saun discussed how elevated inflation and higher rates could impact loan growth and credit quality. He also discussed the company's appetite for additional M&A activity after closing a series of transactions in 2021.
While a number of investors are looking for higher interest rates to drive bank earnings and stocks higher, not all investors are sold on the prospect. Even with the recent selloff, Brad Rinschler, managing partner at Down Range Capital Management, said in the latest Street Talk podcast that he believes valuations of many regional banks remain too high. In the episode, Rinschler and Connor Labozzetta, a partner at Down Range, discussed year-to-date performance of bank stocks, why they think many bank stocks could face pressure in the future and their favorite banks to own.
Many banks have been hesitant to invest excess cash before the Federal Reserve raises short-term interest rates, but they are likely leaving money on the table given the strong move in immediate rates that has already occurred, according to Piper Sandler's Scott Hildenbrand. In the episode, Hildenbrand, chief balance sheet strategist and head of the financial strategies group at Piper Sandler, discussed how banks should view their excess liquidity, investment opportunities in the current market and whether the outlook for interest rates and loan growth should change investment strategy.
A number of banks during fourth-quarter earnings season, including large players like Wells Fargo and Bank of America, unveiled plans to reduce overdraft and nonsufficient fees in 2022 as competitive pressure mounts from neobanks and regulators seek to increase their oversight of the issue. The group of banks that have cut or reduced their overdraft fees own close to 45% of U.S. deposits and likely will pressure many community banks and credit unions to follow suit, according to Lauren Seay, a banking reporter who has covered the topic for S&P Global Market Intelligence. In the episode, Seay explains why banks are making these changes now and discusses how the moves will impact earnings, the competitive landscape and even prompt more M&A activity.
The Federal Reserve's plans to raise interest rates and the return of loan growth will boost bank profitability but the gains might not come as quickly as the Street hopes and that should encourage more bank M&A activity, according to Greg Hertrich, head of U.S. depository strategies at Nomura. In the episode, Hertrich discussed how Fed actions will impact bank profitability and liquidity, whether those results will meet current expectations from the Street and how the performance will alter the bank M&A landscape.
The Federal Reserve might have to raise short-term rates sooner than expected and that could prompt the central bank to end the tapering of its bond purchases early in 2022, according to S&P Global Ratings Chief U.S. Economist Beth Ann Bovino. In the episode, Bovino discussed the outlook for economic growth, inflation and the labor markets, and how those factors will impact future Fed policy.
TD Bank never turned its focus away from growth during the pandemic and the company continues see to see organic and acquisition opportunities, both in and outside of its traditional U.S. retail footprint, according to CEO Greg Braca. In the episode, Braca discussed the company's outlook for growth, including through potential acquisitions, balancing physical distribution with digital channels and the potential threat from fintechs.
Bank stocks and bank M&A activity have rebounded strongly from the depths of the pandemic and the factors driving the resurgence remain in place, according to KBW CEO Tom Michaud. In the episode, the CEO of the Stifel Financial unit discussed current bank stock valuations, the Street's view of the group, the competitive threat of fintechs, recent bank M&A activity, the outlook for transactions in 2022 and how the banking and advisory business has changed during his 10-year tenure as the firm's CEO.
The pandemic has put technology front and center for financial institutions as customers shifted transactions toward digital channels. Meanwhile, fintechs continue to attract even greater amounts of capital and have expanded their offerings to include more banking and insurance products, putting them in direct competition with traditional players. In the episode, three members of the S&P Global Market Intelligence financial institutions research team — Tim Zawacki, Tom Mason and Nimayi Dixit — discuss the intersection between fintech and the banking and insurance sectors. The group also discussed the key themes those companies will face in 2022, including the growth of underwriting based on algorithms in the life insurance business; usage-based insurance in the private auto business; venture funds continued support of fintechs and the pronounced shift of customers away from bank branches and into mobile banking apps.
Some regional banks looking to divest branches have attracted buyers by splitting up the branches and selling them to multiple community banks at once. In the episode, DD&F Consulting President Randy Dennis, who has worked with banks on some of those deals, discussed his outlook for future branch sales, bank liquidity levels and how institutions are evaluating their branch networks in a post-pandemic world where digital adoption has grown.
Bank M&A activity has picked up as institutions face revenue pressures and increasing customer demands to improve technology offerings, and more institutions could pursue to sales as they see some of their strong peers decide to partner with other institutions. In the episode, Collyn Gilbert, director of strategy at Valley National Bancorp, discussed M&A activity, balancing branches against digital channels, competition from neobanks and operating with dual markets in the Northeast and Florida.
For more discussion on bank M&A, join us Sept. 8 to hear the changing drivers and considerations for successful deals in the industry post-pandemic, featuring leading advisors who have been active dealmakers in the last few years. Click here to register for the webinar.
In the episode, Banc of California President and CEO Jared Wolff discussed his outlook for community bank M&A, the health of small business borrowers and their appetite for expansion, and the state of the economic recovery and the potential impact from the emergence of the COVID Delta variant. Wolff also discussed Banc of California's multi-year turnaround that has transformed the company's balance sheet composition, capital structure and management team.
Citizens Financial Group Inc. sees stronger organic growth opportunities than peers, the company remains on the pursuit for acquisitions after announcing plans to acquire the East Coast branches and national online deposit business of HSBC Bank USA NA. In the latest Street Talk podcast, Citizens Financial Chairman and CEO Bruce Van Saun discussed the HSBC deal, the company’s appetite for future acquisitions, balancing physical branches against digital offerings and the outlook for credit quality and loan growth.
As bank M&A continues to heat up, investors could increasingly receive nice pops on their stakes in institutions selling for notable market premiums. In the episode, Anton Schutz, president and CIO Mendon Capital, discussed what has driven bank stock valuations and recent bank deals as well as his outlook for future bank stock performance and M&A activity, including mergers of equals, or MOEs.
Revenue pressures from excess liquidity could create opportunities for community banks to take market share while competitors retreat. In the episode, Jeff Marsico, president at bank advisory firm Kafafian Group, and Jeff Weaver, president and CEO at Dallas-based American Bank suggested that banks should take a contrarian view to the challenging revenue environment and build core deposits, lend to industries most heavily impacted by the pandemic and invest in technology to remain relevant.
In the episode, Jeff Davis, managing director at Mercer Capital, said the real risk facing the U.S. banking sector is that interest rates do not increase materially from current levels and that excess liquidity remains on balance sheets longer than many expect. Banks' traditional revenue streams have also come under pressure at a time when digital adoption has accelerated considerably due to the pandemic. Davis believes banks have little maneuvering room and expect more institutions to look to M&A to cut costs associated with branches to offset revenue headwinds.
M&A and fundraising activity in the fintech sector has started a torrid pace in 2021 and shows no signs of slowing. In the episode, Greg Smith, managing director at fintech-focused investment bank FT Partners, discussed recent M&A and fundraising trends in the fintech sector and activity from special purpose acquisition companies in the space. He also offered his view of fintech valuations, which subsectors have garnered the most interest and his outlook for dealmaking activity, including between banks and fintechs.
Banks should not fall victim to focusing on short-term results and should instead work to deliver long-term shareholder value, particularly in a world increasingly focused on ESG, according to a veteran of the investment community. In the episode, Fred Cannon, the former director of research and head of equity strategy at KBW, who will soon join the FASB, shares his views on bank stocks, how bankers should talk to investors and the threat from fintech.
Bank stocks have surged in recent months as the outlook for credit quality and the broader economy has improved but community bank valuations might have even further room to run, according to GenOpp Capital Management CIO Joe Fenech. In the episode, Fenech discusses his outlook for bank credit quality and why he expects performance to continue to exceed previous expectations. He also highlighted other tailwinds for bank stocks, including the beginning of a M&A wave, which he expects to kick off this year.
Banks will face greater regulatory scrutiny under the Biden administration but could also see the playing field leveled some with their nonbank counterparts. In the episode, Isaac Boltansky, director of policy research at Compass Point Research & Trading, discusses financial regulation under the Biden administration, what the new, key agency heads – Treasury, CFPB and OCC – will focus on in their early days on the job and how the positive change in banks' standing in Washington D.C. could allow them to lobby for regulation of nonbanks, fintechs and possibly even big tech's encroachment into finance.
The current environment is highlighting the value of scale and should encourage more bank M&A activity, including larger transactions, according to KBW CEO Tom Michaud. In the episode, Michaud, whose firm just advised TCF on its $6 billion merger with Huntington, said that more institutions are looking to gain scale to invest in digital channels, become more efficient and close branches and effectively compete with the megabanks. The executive also discussed what has driven banks stock recently and argued that valuations will be higher a year from now.
Banks' credit quality remained quite strong through the third quarter but industries more exposed to the COVID-19 pandemic, like the hospitality sector, have caused a headache for many institutions and performance is unlikely to rebound soon. The episode features third-quarter earnings commentary from banks like F.N.B. Corp and Synovus as well as the outlook for the lodging sector, including when it is expected to recover from the COVID-19 led downturn, provided by members of the S&P Global Ratings team.
As deposits have flooded into the system and loan growth has been hard to come by, many banks find themselves drenched with excess liquidity. The dynamic has put considerable pressure on net interest margins but might not prove short-term in nature like many banks hope, according to Greg Hertrich, head of U.S. depository strategies at Nomura Securities. In the episode, Hertrich said those earnings pressures could remain in place for many banks, prompting them to consolidate branches — particularly in light of increased digital adoption — and pursue M&A activity.
Deposits have flooded into the banking system, leaving institutions sodden with excess liquidity and few attractive options to put the cash to work. In the episode, Scott Hildenbrand, head of balance sheet analysis and strategy in the financial services group at Piper Sandler, discussed the unprecedented inflow of deposits and how to measure whether the funds are short term in nature. He also talked about how banks should approach investing in the current low rate environment and what opportunities to consider.
While many investors have soured on bank stocks, Johnny Guerry, former managing partner and portfolio manager at Clover Partners, and Brad Rinschler, former director of institutional equities at Boenning & Scattergood, are launching a new fund to capitalize on the group's underperformance. In the episode, Guerry and Rinschler talk about the strategy for the new fund – Down Range Capital Management – and the investment opportunity they see as superior to the one that was available at the bottom of the Great Recession. They also discussed what they think the market is missing, why they have comfort over bank balance sheets and the eventual boost some bank stocks could receive when M&A activity resumes.
While a number of financial-focused funds have faced considerable pressure this year, some investors see opportunity amid the volatility. Andrew Wessel, former portfolio manager at Sterling Capital Management, is in that camp and is launching a new long/short financial sector focused fund called Exegis Capital. His partner in the fund, Mick Mulvaney, has a well-known career in Washington D.C., having served as acting white house chief of staff, director of OMB and acting director of the CFPB. In the episode, Wessel and Mulvaney talk about their plans to pair investment experience with the inner-workings of DC to capitalize on regulatory changes that impact the financial services. They also discussed the investment opportunities they see - mostly outside of banks - and the impact of the upcoming election .
Community banks have tapped that debt markets at torrid place in recent months, building capital levels for insurance and flexibility to take advantage of opportunities that could arise amid economic fallout from COVID-19, according to two members of Performance Trust Capital Partners. In the episode, Daryle DiLascia, partner and head of investment banking at Performance Trust, and Brian Leibfried, co-head of client insights and analytics at the firm, discuss what has driven the surge in subordinated debt issuances by community banks, which have nearly matched the levels seen in the full-year 2019, with 80% of the transactions coming in the last three months. The two advisers also highlight how their firm has landed the advisory role in many of the transactions, the coupons associated with the deals and why investors like asset managers, banks and insurance companies find the paper attractive.
Bankers have expressed optimism about loan deferral trends but some members of the Street remain concerned about the unprecedented levels of forbearance and the potential loss content sitting on U.S. bank balance sheets. The episode features commentary from executives at JPMorgan, BancorpSouth Bank, Hancock Whitney, Signature Bank, Synovus Financial, Western Alliance Bancorp and U.S. Bancorp, responding to questions from the investment community about the pace of deferrals – which allow borrowers to defer principal and interest payments - the health of customers receiving forbearance and the amount of reserves institutions might have to set aside for the credits.
The coronavirus pandemic has pushed digital adoption five years into the future, prompted banks to invest more in technology and could set the stage for fintech and bank mergers later this year. In the episode, Todd Baker, senior fellow at Columbia University and managing principal of Broadmoor Consulting; Phil Goldfeder, senior vice president of public affairs at Cross River Bank; and Greg Smith, managing director at fintech-focused investment bank FT Partners, discuss how the coronavirus has changed the way customers access financial services and increased the possibility of mergers between banks and fintechs. The episode also features commentary from executives at Citigroup and Fifth Third about the accelerated pace of digital adoption in recent months.
Bank M&A activity has nearly come to a screeching halt and deal announcements are unlikely to pick up soon. Still, Rick Childs, partner in advisory services group at Crowe LLP, said in the episode that a number of would-be cash buyers are engaging in deal talks but have agreed to longer exclusivity periods with targets given the uncertainty over the economy, asset quality and capital levels at both institutions. Childs also discussed how banks are approaching due diligence in the current environment as well as the possibility of banks terminating or recording goodwill impairments on deals announced before the COVID-19 pandemic.
Banks with exposure to the oil and gas sector have seen their stocks underperform the bank index as oil prices have plunged this year, raising the specter of increased defaults. That sector is unlikely to see relief any time soon. In the episode, Tom Watters, managing director and sector lead oil & gas at S&P Global Ratings, discussed the outlook for oil prices, how this downcycle compares to prior downturns and past bank redetermination periods. He also said oil and gas companies will have a hard time tapping the capital markets or attracting outright acquirers outside of bankruptcy.
The Street remains concerned that banks could have a hole in their balance sheets but even if dire outlooks are realized, the industry's capital levels should remain quite strong. In the episode, members of the investment community discuss current bank stock valuations, the Street’s view of future credit losses and capital levels and the market’s positive reaction to large reserve builds in the first quarter. The episode also features commentary from stress-testing experts, who say banks would be wise to look at the Great Recession for insight into future losses as well as our analysis of bank capital levels if those loss rates occurred this year.
The U.S. government and bank regulators have responded swiftly to the economic fallout from the coronavirus with unprecedented stimulus packages, including $349 billion for small businesses through the Paycheck Protection Program, or PPP. The program has offered a lifeline to banks' small business borrowers and attractive fees to some lenders but a group of bankers and advisers cautioned during our community bankers conference webinar series that the program is just a short-term fix and does come with some risk.
The U.S. government responded to the potential economic fallout from the coronavirus with a historic $2 trillion stimulus package, with nearly $350 billion focused on small businesses through the Paycheck Protection Program, or PPP. While the PPP kicked off with a rocky start, Isaac Boltansky, policy analyst at Compass Point, believes the Federal Reserve and U.S. Congress are committed to making it work, including through additional funding. In the episode, Boltansky, a former member of the TARP Congressional Oversight Panel, discussed the mechanics of the PPP and criticisms to date as well as his expectation for more financial support to come since "deficit hawks are on the endangered species list" in Washington D.C.
Bank stocks have been punished as interest rates have plunged and the outlook for economic growth has soured due to fears over the coronavirus, but the selloff could be overdone, according to RBC Capital Market's Gerard Cassidy. In the episode, Cassidy, head of U.S. bank equity strategy at RBC Capital Markets, discussed what has driven the roughly 40% decline in bank stocks over the last month, what current valuations imply about future performance and what he believes will bring investors back to the sector.
A number of regional banks have pushed for scale to invest in digital channels but some even smaller players have enlisted fintech firms to build platforms on their own. In the episode, Dale Oberkfell, president and CFO of Midwest BankCentre, a St. Louis-based bank with $2 billion in assets, discusses how his institution utilized software from MANTL to build a digital bank that attracted more than $100 million in deposits in just five months. MANTL COO and CFO Raj Patel also discussed future product offerings, including his expectation for more banks to offer commercial loans through digital channels.
South State and CenterState are joining forces in another merger-of-equals driven by the desire to invest in technology, but the deal stands out as both institutions felt the need to partner despite operating on strong footing. In the episode, we we spoke with S&P Global Market Intelligence colleague Zach Fox, who spoke with key advisers about the drivers of the deal. The episode also features commentary from CenterState and South State executives on the deal and the efforts the latter has made to improve digital adoption among its customers as well as comparisons to previous large MOEs such as BB&T/SunTrust and First Horizon/IBERIABANK.
In the episode, Anton Schutz, senior portfolio manager at Mendon Capital, offers his outlook for bank stocks in 2020 as well as bank M&A activity. The longtime bank investor said banks enjoyed a relief rally late in 2019 after being "oversold, underowned and hated" and the prospect of further increases in long-term rates and improvements in efficiencies will drive the group in 2020. Schutz also believes there is investor support for bank M&A, at least in the case of smartly-priced transactions. He said smaller acquirers remain in the catbird seat because they can evaluate a larger pool of potential sellers and have the optionality of selling to another institution.
Traditional banks face increasing competition from digital-only players, leading to further pressure on net interest margins. In the episode, Sandler O'Neill's co-head of investment banking and executives from First Horizon and South State Bank discuss the growth of digital-only deposit platforms, how have they kept banks from decreasing deposit costs despite Fed rate cuts and the investments that community and regional banks are making to combat the threat and improve their product offerings.
The importance of scale has been a driver of larger bank deals announced in 2019 but longtime analyst Nancy Bush is skeptical of the argument. In the episode, the veteran bank analyst, who will retire at year-end, discussed recent large bank M&A, the future of equity research, including the prospect of other analysts opening independent firms like her own, and whether she believes bankers truly have learned lessons from past downturns and are better prepared for an eventual turn in the credit cycle.
The current interest rate environment creates challenges for virtually all U.S. banks but some institutions, like Signature Bank in Rosemont, Ill., are still producing outsized returns. In the episode, Signature President and CEO Mick O'Rourke discusses how his bank has outperformed most banks, built prized noninterest-bearing deposits through superior service and technology and what changes he sees in the operating environment. ________ For more discussion on banks' efforts to modernize and use technology to compete effectively, join us in Charlotte, NC on Dec. 3 for an event focused on digital banking and innovation. https://www.spglobal.com/marketintelligence/en/events/in-person/sp-global-digital-banking-innovation-symposium?utm_source=banner
Financial institutions will move away from Libor, a reference rate that tracks nearly $400 trillion in financial contracts, in just a few years and Goldman Sachs still sees the group adopting the Secured Overnight Financing Rate, or SOFR, despite the recent volatility in the relatively new benchmark. In the episode, Goldman's head of Libor transition, Jason Granet, discusses how prepared the banking industry is for the transition away from Libor, what Goldman is doing today ahead of the move and how the recent volatility in SOFR doesn't change its status as the true replacement for Libor in the U.S., even over alternative benchmark rates that gained some prominence.
A new bank technology firm, Neocova, is looking to chip away at the dominant market share of the legacy core system providers. The big three firms - Fiserv, Jack Henry and FIS – are the core providers for the majority of U.S. banks but Neocova and some others have emerged with new offerings. In the episode, Neocova CEO Sultan Meghji says his firm can help banks compete with larger institutions through greater customization and meet regulatory needs with greater efficiency through artificial intelligence-based technology. Ray Chandonnet, head of Hovde's financial strategy advisory group, recently helped Neocova raise capital, including from a number of banks. He joins the episode and discusses the capital raising process, what community banks like about the platform and how it is different from other new entrants in the space.
Attendees at Camp Kotok, a gathering of market participants every August in Maine, were focused on recent Federal Reserve actions, how U.S.-China relations will influence future decisions and the potential for modern monetary theory to become a regular part U.S. policy. In the episode, Katie Darden, director of FIG research at S&P Global Market Intelligence, discusses the event and shares interviews with veteran practitioners like Jim Bianco, Danielle DiMartino Booth and David Kotok.
Bank stocks have fallen over the last 12 months as fears of a global economic slowdown and a flat-to-inverted yield curve weighed on the group. The selloff caused bank M&A activity to slow early in 2019 but transactions have rebounded. In the episode, KBW President and CEO Tom Michaud discusses investor sentiment toward banks, whether their fears are overblown as well as his thoughts on recent deal activity, including the sales of some FIG-focused investment banks.
Bank branches are much less likely to be located in majority-black communities — even high-income ones — than other parts of the U.S, according to an investigation by S&P Global Market Intelligence. In the episode, Zach Fox, a senior reporter and author of the analysis, discusses how the disparity between majority-black neighborhoods and other areas has grown in recent years, what has driven the change, which institutions have closed the most branches in those markets, what happens to communities when banks leave and whether current regulations such as the Community Reinvestment Act encourage institutions to serve those markets.
FASB has proposed delaying implementation of a new reserve methodology, dubbed the current expected credit loss model, or CECL, for the vast majority of banks. The delay likely will prevent the new model from working as intended and allow institutions to build reserves well ahead of a downturn. In the episode, we highlight the number of banks impacted by the delay and include commentary from FASB board members on the aim of CECL and bankers and strategists weighing in on the prospect of a recession.
Financial institutions might be wise to prepare for lower interest rates and potentially for a fairly long time. In the episode, Tony Crescenzi, market strategist at PIMCO, discusses the recent yield curve inversion and his expectation for rates to remain low for a long period of time and possibly even decline notably from current levels.
A few years ago, blockchain technology caught fire across the Street, with some market participants arguing that it would displace many traditional financial services. Those lofty expectations have come back to earth, but practical applications are beginning to surface, including from the nation’s largest banks. In the episode, Tom Mason, fintech analyst at S&P Global Market Intelligence, discusses whether blockchain is a disruptor of traditional financial services or another arrow in the quiver for incumbent players.
As the equity research business continues to face revenue headwinds, more firms could look to merge with pure play advisory shops. In the episode, George Kuznetsov, head of research and analytics at Coalition, which is owned by CRISIL under the S&P Global umbrella, discussed changes in i-banking league tables as well as the evolution of the equity research business and how it is only profitable for a few but essentially necessary for the vast majority of firms.
Fintech companies and digital-only players have become a threat to traditional banks' retail deposit bases and they could soon turn their focus toward commercial customers. In the episode, experts from Promontory Interfinancial Network and Sandler O'Neill and executives from Goldman Sachs, Heritage Bank and Republic Bank discuss the growth of digital-only deposit platforms, how they have changed the competitive landscape and what community banks can do to combat the threat.
Investment banking firm Hovde recently unveiled a new practice that will work with community and regional banks on asset/liability strategies and ways to utilize technology, including through fintech partnerships, to improve efficiency. Ray Chandonnet, a banking industry veteran and head of the new group, discussed his return to investment banking, different funding strategies banks can employ to win business in a competitive environment and how institutions can work with and emulate fintech startups to attract new customers and become more efficient.
Some fintech companies are making hay with digital platforms that tout their differences with banks, even though they are often offering virtually the same products. In the episode, we discuss with colleagues Rachel Stone and Kiah Haslett the deposit strategies employed by the likes of Chime, Aspiration and other incumbent players such as Ally Financial, Discover and Capital One. Those efforts conjure up memories of a Don Draper pitch in Mad Men and likely will enjoy continued success.
The days of large bank buyers pursuing deals to plant a flag in a new market might be gone with acquirers now seeing deals as a way to support investments in technology. BB&T touted that prospect when discussing its landmark merger of equals with SunTrust. In the episode, we spoke with S&P Global Market Intelligence colleagues Zach Fox and Joe Mantone about the drivers of BB&T/SunTrust merger, how much i-banks advising on the deal stand to earn and the prospect of other similarly sized transactions emerging in the future.
The PG&E Corp. bankruptcy shows that financial backers of California utilities need to consider the risks associated with climate change but that exposure might be unique to entities operating in the state. In the episode, Regulatory Research Associates analysts Dan Lowrey and Dennis Sperduto discuss the next steps in PG&E's bankruptcy process, the future of its power purchase agreements and the risks that climate change can bring to backing utilities.
The competition for deposits is quite fierce and banks might even feel the greatest pressure when vying for large commercial customers. In the episode, Kelly Brown, CEO of American Deposit Management, a financial services firm that helps connect depositors with banks, talks about the competitive landscape and pricing in the market, while offering strategies to win new business. https://americandeposits.com
Bank stocks just recorded their worst annual performance in seven years. Some analysts believe the selloff has left bank stocks undervalued, while others see few tailwinds to drive the group higher. In the episode, we highlight outlooks from Keefe Bruyette & Woods and Hovde Group analysts and make the case that investors looking for a port in the storm would be wise to back strong deposit franchises.
The recent selloff has put some banks on sale at a time when their deposits are only becoming worth more, according to Chris Marinac, co-founder and director of research at FIG Partners. The veteran analyst believes bank stocks have fallen too much over the last two months and he sees value in strong deposit franchises, some of which could receive healthy takeout offers at some point down the road.
Digital lenders have enjoyed explosive growth but no longer are seen as pure disruptors to the banking industry as partnerships with traditional lenders have grown. Nimayi Dixit, research analyst at S&P Global Market Intelligence, explains how digital lenders have been successful and why many of their models likely will continue to evolve into fee-based, technology providers for banks.
Several big banks have enjoyed early success in attracting new funds through national digital platforms and community banks should take notice as the battle for deposits heats up. The episode highlights the digital strategies employed by banks like Citizens Financial, PNC Financial and Goldman Sachs and features commentary from the management teams of those institutions.
Hurricane Maria caused close to $90 billion in damages in the Caribbean and took the lives of a nearly 3,000 people in Puerto Rico. The storm devastated telecommunications services and turned the island into a cash economy, making funds scarce for many banking customers. Lindsey White, who manages S&P Global's financial institutions' news team, visited Puerto Rico and spoke with bankers, regulators and members of the community about the aftermath of the storm, how banks responded and the market opportunities that lie ahead.
U.S. IPO activity rebounded in the second quarter while big-ticket deals continued to drive growth in M&A activity. Favorable conditions remain in place and could help 2018 close near record levels, according to Joe Mantone, senior editor at S&P Global Market Intelligence. Mantone said that all means good things for investment banks, which are expected to fly high on strong results this year.
The leveraged loan market has ballooned to record levels and the concentration of covenant-lite deals has grown in kind, leaving investors with less protection if loans move into default. Tim Cross, managing editor LCD news, and Marina Lukatsky, director of LCD research, discuss the current state of the market and why they aren't sounding an alarm yet.
Greg Hertrich, managing director and head of U.S. depository strategies at Nomura, believes deposit competition should intensify further as interest rates move higher and a handful of large banks roll out national deposit platforms. He discussed how other banks could follow the move and how higher rates are one of rising risk factors that could challenge credit quality.
KBW President and CEO Tom Michaud discussed the disconnect between banks' strong fundamental performance and investors' trepidation toward to the group. The Street has also reacted negatively to a handful of big-ticket bank deals, but Michaud believes large bank M&A activity will pick up.
Joe Fenech, head of equity research at Hovde Group, discussed current bank stock valuations, the growing importance of deposits in valuing franchises and the market's increased skepticism toward M&A, including transactions that appear favorable for the buyer.
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, has changed the way the agency operates and reduced enforcement actions against banks. Now, Mulvaney is turning his attention to a powerful tool used by the agency called the civil investigative demand. S&P Global Market Intelligence colleague Brian Cheung discusses how the CFPB uses the tool and what changes could mean for banks and consumers.
CD specials are back. More banks are offering the promotional rates on CDs, or certificates of deposits, to attract new customers. While that is good news for savers, it means funding costs likely will rise even more for banks. The episode shines a light on recent CD rates offered by banks and features commentary on smart deposit strategies from Bruce Hinkle of StoneCastle Cash Management and KeyCorp CFO Donald Kimble.
De novo banks, or newly formed institutions, were all the rage before the credit crisis but virtually dried up in the years after the Great Recession. The tide is finally beginning to turn, with investors seeking to open banks across the country. Randy Dennis, president of DD&F Consulting, who has helped charter close to 100 banks in his career, discusses the new class of de novos and believes there will be considerably more activity.
More banks are reaching further out the yield curve in their loan portfolios to meet customer demands but, increasingly, advisers believe institutions need to proceed with caution. In the episode, experts from PIMCO, Sandler O’Neill, Chatham Financial and PrecisionLender discuss rate risk and how banks focused on funding will ultimately prove the winners.
Blockchain has been touted as a revolutionary technology that change will financial services forever. But, so far, despite millions invested in research and development by incumbents, fewer use cases have emerged than some had expected. Tom Mason, fintech research analyst at S&P Global Market Intelligence, explains how blockchain technology works and discusses its practical applications in financial services, while dispelling the notion that it will displace large institutions.
Deposits have become far more important to banks over the last year, particularly acquirers looking to bolster their funding bases. Given the change, Piper Jaffray analysts Matthew Clark and Will Curtiss say bank investors might find the greatest upside putting their cash behind would-be sellers with strong deposit franchises.
A new accounting provision changing the way U.S. banks reserve for loan losses will reduce the industry's capital by more than 10% and lead to greater volatility in earnings but might leave institutions better prepared for a downturn. Banks won't take the change in stride and are expected to respond by raising loan prices and slowing growth. Two colleagues from S&P Global Market Intelligence – Chris Vanderpool, a co-author of our bank projections, and Kiah Haslett, who reports on accounting issues – discuss the impact on the industry.
Banks across the U.S. continue to shrink their branch networks but one community bank, Citizens Bank of Edmond, has gone a step further and replaced physical locations with innovative strategies, including the creation of a street festival and a coworking space for customers. Jill Castilla, the bank's CEO, discussed the transformation and how it has paid dividends.
While tax reform will offer big boost to bank earnings, some bankers, including the CEOs of JPMorgan and Capital One, expect the windfall of profits to lead to increased competition. Fiercer competition could benefit consumers since they would receive lower prices on loans and higher rates on deposits but it would mean lower margins for banks, whose stocks have rallied on the prospect of higher profits.
A new accounting standard that changes that way banks reserve for loan losses might not sound that earth-shattering but it could lead to a capital shortfall as large as $70 billion across the banking industry. Josh Siegel, CEO of StoneCastle Partners, an investor and adviser to community banks, and Ethan Heisler, president of the Bank Treasury Newsletter, discuss the impact of new standard, dubbed the current expected credit loss model, or CECL.
We spoke with Rick Childs, partner at Crowe Horwath LLP, about tax reform's impact on bank M&A activity. While tax reform has caused bank stocks to rise and could make a number of deals easier to ink, a lower tax rate will make one aspect of bank acquisitions more expensive.
In the episode, we offer our updated and more bearish outlook for community banks. While community bank earnings are still poised to grow higher, largely due to a boost from tax reform, hopes for considerable margin expansion have been dashed.
We spoke with PL Capital's Rich Lashley, longtime bank investor and shareholder activist, about his view of U.S. banks and how the increase in valuations has left fewer investment opportunities. He also offered his outlook for M&A activity and fundamentals, including the prospect of rising deposit costs that will likely separate the true "haves and have nots."
We spoke with the co-heads of Stephens' financial institutions practice about the resurgence in bank IPO activity, what investors are looking for in new issuances, the current IPO pipeline and the success the firm has enjoyed since ramping up its depository practice.
We spoke with Jeff Davis, managing director of Mercer Capital's financial institutions group, about banks' third-quarter earnings season, what results say about the current stage of the credit cycle, stock valuations and the prospect of higher deposit costs and future loan growth.
In the latest episode, we discussed the highlights of the Big Decisions in Banking Conference with S&P Global Market Intelligence colleagues Brian Cheung and Eric Turner. The conference covered the future of bank M&A, regulation and the current stage of the credit cycle as well as the crossover between fintech and traditional banking.
We spoke with Sandler O'Neill Chief Balance Sheet Strategist Scott Hildenbrand about the growing importance of deposits in bank M&A and what actions banks have taken to prepare their funding bases for rising rates.
We spoke with KBW President and CEO Tom Michaud about his outlook for bank stocks, what issues are of most importance to investors and how deposits are coming back in focus in bank M&A activity.
We asked three members of S&P Global Market Intelligence team – Bill Holland, Tim Zawacki and Zach Fox – how Hurricane Harvey will impact the energy, insurance and banking sectors.
We spoke with Raymond James Managing Director Michael Rose about banks' exposure to the retail sector and whether investors' concerns over the issue are warranted.
We spoke with Jones Day Partner Chip MacDonald about the potential for regulatory reform and what certain carve-outs could mean for the smaller institutions, including de novo banks.
We spoke with fintech research analyst Eric Turner about the impact blockchain will have on banks and financial services as well as the practical uses and potential cost of ignoring the technology.
We spoke with veteran analyst Gerard Cassidy about recent rate hikes, the upcoming stress tests and how new bank-regulatory heads could clear the way for big bank mergers.
We spoke with bank investor Anton Schutz about the market's response to recent bank deals and his outlook for M&A activity, including the possibility for more big-ticket deals.
We spoke with Isaac Boltansky, director of policy research at Washington, D.C.-based Compass Point Research and Trading, on April 28 about the likelihood of proposed reforms seeing the light of day in their current form.
In mid-April, veteran bank analyst Nancy Bush discussed the change in investor sentiment toward the bank group over the last five months.