• News
    • Stocks
    • Banks and Finance
    • Companies
    • Crypto
    • Forex
  • Videos
  • Articles
    • Forex CRM
    • Crypto Payments
    • Trading
    • Crypto Exchange Business
    • Forex Business
    • Fintech
    • Liquidity
    • FinTech Awards
  • Liquidity Providers List
  • Crypto Payment Providers

Dark Theme

The Market Has the Wrong Perspective on Bank Stocks

May 12, 2023

The Market Has the Wrong Perspective on Bank Stocks

Bank stocks have been hammered by the market, and it hasn’t always been apparent why.

Since the March failure of Silicon Valley Bank, practically all bank stocks have fallen about 30%. According to a Tuesday report from Morgan Stanley bank analysts, deposit losses remain the main concern, and investors appear to be running three types of stock screens to forecast the next bank run. These are the levels of uninsured deposits, bond losses as a percentage of capital, and commercial real estate loans.

These are the wrong screens, writes analyst Manan Gosalia of Morgan Stanely. “We disagree with this approach,” he says. “This recent stock reaction is overdone as there is currently no evidence of accelerating deposit outflows.”

Accounts with balances of more than $250,000 that are guaranteed by the Federal Deposit Insurance Corp. are frequently used by firms as operational accounts, and such accounts are sticky and difficult to relocate, according to the Morgan analyst. According to him, the paper losses on a bank’s bond holdings would eventually flow back into the bank’s capital. And, while losses on commercial real estate loans are certain, they will take time to appear on the bank’s books.

According to Gosalia, bank revenues will be constrained this year and next as banks pay more to attract deposits, offer fewer loans, and reserve for commercial real-estate loan losses. Morgan Stanley cut its 2024 profit predictions for regional banks by an average of 27% following the industry’s March quarter reporting.

Morgan Stanley’s stock recommendations demonstrate why the firm believes the three most often utilized screening criteria might be misleading. Cullen/Frost Bankers (CFR) has an Overweight rating from Morgan Stanley, but the Texas bank had one of the lowest March quarter levels of insured or collateralized deposits – 50% of its deposits — among the 30-odd institutions evaluated. According to the most recent report, Cullen/Frosts’ unrealized securities losses were 87% of its tangible book value – one of the biggest in the group. Commercial real estate loans accounted for 17% of assets at the end of 2022, putting the Texas lender at the group’s median.

Nonetheless, Morgan Stanley is confident about Cullen/Frost since the bank has a pile of cash equal to 18% of its assets. Cullen/Frost should be able to support loan expansion and deposit drawdowns with this stockpile.

M&T Bank (MTB), Morgan Stanley’s top selection, benefits from the liquidity provided by a pile of cash. The Buffalo, New York-based bank has one of the highest levels of commercial real estate exposure in the industry, but it may also be one of the few banks with enough liquidity to undertake a stock buyback.

Morgan Stanley expects all of the midsize banks it follows to drastically limit loan growth, from 9% year on year in the March quarter to just 2% by December.

This might become a concern felt well beyond the confines of bank stocks. Small enterprises in the United States are financed through regional and community banks.

We spoke with Philip Harrison, who heads research at Visible Alpha, a data service that combines the research of many sell-side firms to show the average forecast for granular aspects of a public company’s operations, to get a sense of loan-growth forecasts by all of Wall Street, not just Morgan Stanley.

Visible Alpha investigated Wall Street’s projections for loan growth at midsize bank stocks. Several banks, notably Valley National Bancorp (VLY), Bank OZK (OZK), and Comerica (CMA), shocked analysts with robust year-over-year loan growth in the March quarter.

But lending at most regional banks fell short of March quarter hopes, including some whose stock drops have made headlines, such as Western Alliance Bancorp (WAL) and PacWest Bancorp (PACW). The Visible Alpha data show that Wall Street has steeply reduced forecasts for loan growth in 2023 and 2024 for most regional banks.

Morgan Stanley’s analysis on Tuesday highlighted two things that could quickly improve the outlook for banks. The F.D.I.C. and other regulators could push Congress to expand deposit insurance for banks below the few who are too big to fail. And the Federal Reserve could start discussing interest-rate reductions.

Given how far bank stocks have sunk, Morgan’s Gosalia says, “We believe even a discussion around these topics in the coming months could drive a rebound in the group.”

Subscribe Our Newsletter

Bulls Showed Their Horns. Bitcoin’s Price Is Rising

Milena

Bulls Showed Their Horns. Bitcoin’s Price Is Rising

For some days now, the price of the most popular cryptocurrency has been rising. Let’s see what is going on.

Crypto
These Stocks Are Moving the Most Today: Silvergate, General Electric, and More

Milena

These Stocks Are Moving the Most Today: Silvergate, General Electric, and More

As investors continued to consider whether increased interest rates will cause the U.S. economy to enter a recession, stock futures were falling on Thursday. Let’s see which one.

Stocks
Liquidity Provider

How to Become a Liquidity Provider?
Let's find out what is the role of a liquidity provider, basic steps how to become a liquidity provider, partnership conditions for brokerage companies and more.

discover
How to Identify Liquidity?

Liquidity Provider

How to Identify Liquidity?

Let's find out how to identify Forex Liquidity, how to identify the liquidity of cryptocurrencies, and how to pick the best LP.

Liquidity

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries b2broker

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Tamta

    Guide to Craiyon: How To Use a New DALL-E Mini

    https://liquidity-provider.com/app/uploads/2023/06/cover-5-800x540.jpg

    Tamta

    Credit Cards vs. Debit Cards

    https://liquidity-provider.com/app/uploads/2023/06/cover-800x540.jpg

    Tamta

    Investing In Private Equity: What Should You Know?

    https://liquidity-provider.com/app/uploads/2023/05/cover-7-800x540.jpg

    Tamta

    What is Data Analytics? Techniques, Tools, Methodology, and More

    https://liquidity-provider.com/app/uploads/2023/05/cover-6-800x540.jpg

    Tamta

    Bitcoin Halving is Coming: What Does it Mean for the Crypto Market?

    https://liquidity-provider.com/app/uploads/2023/05/cover-4-800x540.jpg

    Tamta

    Crypto Token Supply From A to Z

    https://liquidity-provider.com/app/uploads/2023/05/cover-3-800x540.jpg

    Tamta

    What Is ChatGPT, And How Can You Use It?

    https://liquidity-provider.com/app/uploads/2023/05/cover-2-800x540.jpg

    Anton

    Trading on Autopilot: The Rise of Crypto Trading Bots

    https://liquidity-provider.com/app/uploads/2023/05/cover-1-800x540.jpg

    Tamta

    Crypto Investing vs. Crypto Trading: What’s The Difference?

    https://liquidity-provider.com/app/uploads/2023/04/cover-5-800x540.jpg

    Tamta

    Understanding Indexed Universal Life Insurance (IUL)

    https://liquidity-provider.com/app/uploads/2023/04/cover-4-800x540.jpg

    Tamta

    Best Investment Strategies For Beginners

    https://liquidity-provider.com/app/uploads/2023/04/image1-800x540.jpg

    Tamta

    Understanding Perpetual Futures: How Do They Work?

    https://liquidity-provider.com/app/uploads/2023/04/cover-3-800x540.jpg

    Tamta

    What Is A Bitcoin Stock-To-Flow Model? Beginner’s Guide

    https://liquidity-provider.com/app/uploads/2023/04/cover-2-800x540.jpg

    Tamta

    Best Decentralized Crypto Exchanges In 2023

    https://liquidity-provider.com/app/uploads/2023/04/cover-1-800x540.jpg

    Tatma

    Best High-Yield Savings Accounts For March 2023

    https://liquidity-provider.com/app/uploads/2023/04/cover-800x540.jpg

    Tamta

    Crypto Trading For Beginners

    https://liquidity-provider.com/app/uploads/2023/03/cover-8-800x540.jpg

    Tamta

    How To Make Money With Cryptocurrency

    https://liquidity-provider.com/app/uploads/2023/03/cover-7-800x540.jpg

    Tamta

    What Is A Candlestick Chart?

    https://liquidity-provider.com/app/uploads/2023/03/cover-6-800x540.jpg

    Constantine

    White Label Forex Software — Ultimate Guide on How to Choose The Best Industry Solution

    https://liquidity-provider.com/app/uploads/2023/03/cover-3-300x203.jpg

    Tamta

    Forex Trading: A Beginner’s Guide

    https://liquidity-provider.com/app/uploads/2023/03/cover-2-300x203.jpg

    Tamta

    How to Create a Cryptocurrency

    https://liquidity-provider.com/app/uploads/2023/03/cover-1-1-300x203.jpg

    Tamta

    Top Ten Richest People In The World, 2023

    https://liquidity-provider.com/app/uploads/2023/03/cover-4-1-300x203.jpg

    Constantine

    What’s at Stake? Here’s How to Avoid Scam Tokens

    https://liquidity-provider.com/app/uploads/2023/03/cover-5-300x203.jpg

    Constantine

    Investing in Currencies That Are More Valuable Than the American Dollar

    https://liquidity-provider.com/app/uploads/2023/02/cover-2-300x203.jpg
    • News
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
    • Articles
      • Forex CRM
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
    [email protected]

    © 2023 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy