Nancy Bush
NAB Research, LLC, is a South
Carolina-registered investment advisory firm specializing in providing
independent research on financial services stocks to institutional investors.
NAB Research, LLC, is not affiliated with any brokerage firm or hedge fund and
does not manage money for individual investors.
NAB Research, LLC ~ Menu
39556 |
|
NAB Research, LLC ~ Header
 |
"A career built on independent thinking" |
|
Bank Statements
TARP'ed
|
|
There are a few phrases and words that I have heard in the last
few months that I am now fully ready to delete from memory. Among
themBill OReilly and Keith Olbermann, lipstick on a pit
bull, edgy bank branches, and finallyTARP. Id
like to eliminate that last one for several reasons, not the least of which is
the fact that I was the daughter of a very Southern man. That fact meant that
every November, the advent of deer hunting season meant that a big blue
tarpaulin would eventually appear in the back of the old red pickup truck,
usually signaling that something large and no longer alive was under it.
Not the mental image that I necessarily want to have in my head when
contemplating of the fate of the banking industrybut one that may be more
apt than I want to admit.
The BancAnalyst Association of Boston annual conference
last week gave a whole group of us bank analysts an opportunity not only to eat
ourselves silly, but to hear the word TARP mentioned way more times than it
should have been. It became very clear that this thing has rapidly
evolved into something other than its initial meaninga
closed-door, one-way, no-way-to-say-no investment by a Treasury Department in
full panic modeinto some weird Good Housekeeping Seal of
Approval. Rather than accepting this investment as a sign of
weakness, there now seem to be a whole cadre of bank CEOs who are
giddily waving their TARP documents around in public, seeing them as some
sign that theyre not really as bad as they seem and that they and their
banks will get to live another day.
Sullivan & Cromwell head
Rodgin Cohen spoke to us on Thursdayand besides scaring the bejeezus out
of all of us, he also pointed out something that we all already knewthat
a number of the banks that are getting the TARP preferred, probably
shouldnt be. He also admitted that this plan would likely slow the
consolidation of the industry and would allow some of the weaker players to
linger in an environment that normally would have been killer to mediocre
managements. However, he also pointed out that Treasurys infusion may
not be sufficient in the end to keep these companies from failure, and that
the initial intentto prevent a wave of failures that would cripple
economic recovery and send the global system crashingwill eventually
give way to the next wave of mergers after some of these marginal banks
have to confront the realities of their situations.
In any case, this is the week
when the rubber hits the roador some other such apocalyptic metaphor.
Mr. Cohen pointed out that the regulators are now in the final throes of
determining which banks will not get the funding, and that the tests for
CAMEL ratings are now being quickly updated and the final decisions are
being made. The viability test is a before
testi.e., before the infusionand those banks rated 4 or 5 will not
likely get the funding. Those banks not deemed viable will not be disclosed but
will simply be doomed to failure within a day or twowhich means that
they will have to go looking for a merger partner at any price to
shareholders.
Since the final day for applications is this Friday, November
14and decisions should come very quickly thereafterit looks
like we may be back to exciting Monday mornings after having a few weeks of
relative calm. But if this marks the end of Round Onethen bring it
on. I for one am ready to go on to the next phase of this
evolutionone that will likely last well into 2010and will show us
who the real banking survivors are. My betwe
may all be surprised by some who disappear from the radar
screenTARPed or not. |