Author Topic: Are big banks value traps ?  (Read 38049 times)

sleepydragon

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Re: Are big banks value traps ?
« Reply #160 on: May 23, 2020, 09:57:51 AM »
In other news, in an example of the fake vol suppression that accompanies illiquid investments; the TIAA real estate account, which owns low leverage ďcoreĒ real estate, some cash, and REITs, including 37% office and 20% retail IS FLAT year to date. TIAAís general account guarantees liquidity to people who own QREARX.

This happened in Ď08 too, allowing saavy non profit workers to punch out and buy risk assets (or go to cash) at fake marks.

If anyone knows a teacher or professor or cop or whatever that might be long this, I suggest you get in touch with them and explain that a fund that is 57% office and retail should not be flat year to date and strongly recommend they sell (either to replace with REITs or hide out in something else that isn't so mismarked).

https://fluenttech.tiaa.org/pdf/factsheet/878094200.pdf

Check out the two largest investments, malls held alongside BPY and SPG.

Flat year to date, hah!

Fashion Show Mall: Fashion Show is held in a joint venture with Brookfield Property Partners LP, in which the Account holds 50% interest, and is presented gross of debt. As of March 31, 2020, this debt had a fair value of $417.9 million

Florida Mall: The Florida Mall is held in a joint venture with Simon Property Group, L.P., in which the Account holds a 50% interest, and is presented gross of debt. As of March 31, 2020, this debt had a fair value of $155.8 million.

https://www.wsj.com/articles/when-your-lookalike-funds-dont-act-alike-11590159641?redirect=amp&from=groupmessage&isappinstalled=0#click=https://t.co/CBMF5IIYSB

I am willing to bet Jason Zweig is a member on COBF


elliott

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Re: Are big banks value traps ?
« Reply #161 on: June 27, 2020, 02:19:20 AM »

https://thehill.com/policy/finance/504616-fed-bans-stock-buybacks-caps-dividend-payments-for-big-banks-after-stress

Cullen Roche:
Quote
Let me translate this for you. The Fed is very worried about the banking system.

sleepydragon

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Re: Are big banks value traps ?
« Reply #162 on: June 27, 2020, 04:31:22 AM »

https://thehill.com/policy/finance/504616-fed-bans-stock-buybacks-caps-dividend-payments-for-big-banks-after-stress

Cullen Roche:
Quote
Let me translate this for you. The Fed is very worried about the banking system.

I donít think the Feds are worried about the banking systems. The data says it all. Banks will need to lose a lot of money in the stress test scenario. We are still far from that. The whole point of stress test is the data is transparent. People can see banks have enough capital to weather the problem.
The dividends caps merely indicate that Feds admit they donít know when the virus will ends, which shows Fed is rational. Itís also formula based so good banks can keep paying dividends but bad banks stops.

wabuffo

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Re: Are big banks value traps ?
« Reply #163 on: June 27, 2020, 07:55:59 AM »
The massive expansion of the Federal Reserve's balance sheet since the Great Financial Crisis (GFC) has helped to increase the safety and soundness of the US commercial banking system.  I think that is an important aspect that most people miss when they think about this crisis vs the last major crisis (GFC).

Pre-GFC, (using the Fed's H.8 and H.4.1 reports for July 6, 2006 as an example of a point in time before the mortgage crisis), the US banking sector had $10.6B of reserves on deposit at the Fed vs $8.229t of total bank assets (0.1% of total assets).

By comparison, if one looks at the latest numbers (as at June 17th, 2020), all federally-chartered US commercial banks combined have $3.069t in reserve balances* at the Federal Reserve vs total assets of $20.246t.   So 15.2% of the entire US banking sector's assets are on deposit in cash at the Federal Reserve!  It really is night and day vs pre-GFC.
 
That's part of the reason for the repo mess last September, bank regulators are leaning on banks to use their deposits at the Fed as the primary asset to meet liquidity coverage ratios and "living will" requirements.
 
wabuffo

* the $3.069t of banking reserves on deposit at the Fed from the H.4.1 report matches the "non-seasonally adjusted bank cash assets" of $3.084t on the Fed's H.8 report.  The small difference is minor amounts of cash and vault cash held by the banks at their branches.
« Last Edit: June 27, 2020, 08:01:19 AM by wabuffo »

Spekulatius

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Re: Are big banks value traps ?
« Reply #164 on: September 05, 2020, 11:28:06 AM »
As for Fintech, this is an interesting excerpt from RKT (Rocket Company) 424B:
Quote
Since our inception in 1985, we have consistently demonstrated our ability to launch new consumer experiences, scale and automate operations, and extend our proprietary technologies to partners. Our flagship business, Rocket Mortgage, is the industry leader, having provided more than $1 trillion in home loans since inception while growing our market share from 1.3% in 2009 to 9.2% in the first quarter of 2020, a CAGR of 19%. We have also expanded into complementary industries, such as real estate services, personal lending, and auto sales. In each of these gigantic and fragmented markets, we seek to gain share and drive profitable growth by reinventing the client experience.

Between mortgages and payments, it seems that some companies are running circles around the big banks, just like WMT, TGT and others did with department stores in retail.
I have personally done probably 8-9 mortgages (mostly refinances) and have all of them but two through brokers. In In my experience, brokers platforms now run circles around how banks are doing business. I only once tried with Rocket mortgage and did not find their interest rate / conditions to be competitive at that time (2015).
« Last Edit: September 05, 2020, 12:08:19 PM by Spekulatius »
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wabuffo

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Re: Are big banks value traps ?
« Reply #165 on: September 05, 2020, 12:29:33 PM »
Between mortgages and payments, it seems that some companies are running circles around the big banks

They haven't made much market share progress this year.   But then these fintechs have to rely on traditional banks for both their wholesale financing as well as payment clearing.  Or they arb in between tiny cracks in the regs (e.g., debit interchange capped fees for large banks).   For example, mortgage origination has always relied on wholesale bank funding.  But if you are not a bank, you are always vulnerable to your funding being pulled.

When your competitor is also your supplier and is a monetary agent of the federal government (i.e., federally-chartered bank), I think its very tough to beat them.  Unless, the fintech is approved to also be a federally-chartered bank and submit to all of the Fed's regulatory apparatus.

wabuffo
« Last Edit: September 05, 2020, 12:31:05 PM by wabuffo »

Spekulatius

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Re: Are big banks value traps ?
« Reply #166 on: September 05, 2020, 01:25:19 PM »
Between mortgages and payments, it seems that some companies are running circles around the big banks

They haven't made much market share progress this year.   But then these fintechs have to rely on traditional banks for both their wholesale financing as well as payment clearing.  Or they arb in between tiny cracks in the regs (e.g., debit interchange capped fees for large banks).   For example, mortgage origination has always relied on wholesale bank funding.  But if you are not a bank, you are always vulnerable to your funding being pulled.

When your competitor is also your supplier and is a monetary agent of the federal government (i.e., federally-chartered bank), I think its very tough to beat them.  Unless, the fintech is approved to also be a federally-chartered bank and submit to all of the Fed's regulatory apparatus.

wabuffo

These brokers own the customer relationship and associated data though. The Banks often do commoditized stuff like wholesale financing and mortgage servicing (which also provides an opportunity to get a customer relationship) but those are low ROA activities that just require large balance sheet capacity.

The future of Banks will be decided how strong their internal tech stack is rather than branches and deposits. In fact, in the current interest environment, low cost deposits have lost much of their value.
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cherzeca

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Re: Are big banks value traps ?
« Reply #167 on: September 05, 2020, 01:35:52 PM »
"In fact, in the current interest environment, low cost deposits have lost much of their value."

while I tend to agree, if we ever do get into a rising rate environment, banks know how to raise loan rates more quickly than deposit rates...huge financial leverage possible with this huge deposit base

Spekulatius

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Re: Are big banks value traps ?
« Reply #168 on: September 06, 2020, 08:16:07 AM »
"In fact, in the current interest environment, low cost deposits have lost much of their value."

while I tend to agree, if we ever do get into a rising rate environment, banks know how to raise loan rates more quickly than deposit rates...huge financial leverage possible with this huge deposit base

This is correct, but a better way to play rising interest rates in clean way is to buy SCHW (I own a little). No issues with credit risk, Fed interfering but somewhat sensitive to asset valuations. Itís higher valued but also a better business than banking, imo.
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LearningMachine

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Re: Are big banks value traps ?
« Reply #169 on: September 06, 2020, 09:00:50 AM »
This is correct, but a better way to play rising interest rates in clean way is to buy SCHW (I own a little). No issues with credit risk, Fed interfering but somewhat sensitive to asset valuations. Itís higher valued but also a better business than banking, imo.

Are you not worried about their history of dilutions from 2009 to 2018?