Deutsche's Question Bank September 2010
September 08, 2010 7:13 AM
Deutsche Bank has posed some key questions currently facing banks:
1. With NII/NIMs being pressured by continued declines in interest rates, how will banks increase/maintain revenues?
2. After being net sellers of securities in 2Q, the largest US banks have been net buyers of securities so far in 3Q, despite a further decline in rates. Why are banks buying securities now?
3. BBT recently pulled a large portfolio of distressed loans from the sales market. What drove this decision and will this have read-throughs for other banks' ability to sell NPAs?
4. With recent signs of some weakening in the economy, will this increase the amount of DTA that is excluded from regulatory/GAAP capital (after seeing declines at some banks in 2Q)?
5. CMA recently announced it will redeem all of its $500M of TruPs at par. Should we expect similar moves from other banks? (Note that the largest 17 US banks have over $100B of TruPs outstanding).
6. Given improved capital/reserves at many banks and an outlook for a continued sluggish revenue environment, a number of banks believe M&A will pick up soon.
7. Mortgage rates have declined about 25bps since 6/30 and refinancing application activity has increased meaningfully. Given this how will prepayments effect reinvestment risk in banks' securities portfolios?
Deutsche Bank's current ratings for these banks:
Bank of America (NYSE: BAC),USD13.50 Hold
BB&T (NYSE: BBT),USD23.56 Hold
Citigroup (NYSE: C),USD3.91 Buy
Comerica (NYSE: CMA),USD36.93 Hold
First Horizon (NYSE: FHN),USD10.60 Hold
Fifth Third (NASDAQ: FITB),USD11.92 Hold
Huntington (NASDAQ: HBAN),USD5.73 Hold
JPMorgan Chase (NYSE: JPM),USD39.17 Buy
KeyCorp (NYSE: KEY),USD8.03 Hold
Marshall & Ilsley (NYSE: MI),USD7.07 Hold
M&T Bank (NYSE: MTB),USD88.93 Hold
PNC (NYSE: PNC),USD54.93 Buy
Regions Financial (NYSE: RF),USD6.89 Hold
SunTrust (NYSE: STI),USD24.18 Buy
TCF Financial (NYSE: TCB),USD15.52 Hold
US Bancorp (NYSE: USB),USD22.67 Hold
Wells Fargo (NYSE: WFC),USD25.84 Buy
Zions (NASDAQ: ZION),USD20.36 Hold
