Bank Stocks: Controlling the narrative (except for credit quality)
Report by Portales Partners
Charles Peabody does not believe that the problems at NYCB will prove to be unique. He thinks the credit cycle has further to play out and that it will get a lot worse before it gets better. He expects regulators to find similar problems at other regional banks. It’s just that they may want to “pace” the discovery process so as not to create a systemic crisis. In the meantime, regional banks (a la Columbia Banking System) will be encouraged to build liquidity (at the expense of NIM) so that they might be able to absorb negative fundamental news (either within their own franchise or at a neighbouring bank). The current risk/reward for bottom fishing is simply not worth it.