This was our Feature story in Oddball Stocks Newsletter, Issue 32, in November 2020. As we wrote,
As long as covid goes away (either through vaccination or herd immunity) in the early part of next year and borrowers who have deferred resume their normal payments, the current valuations will look cheap. There are certainly many bankers feeling sanguine about their loan portfolios given the astonishing number of share repurchases that have been conducted or announced by banks this fall and winter. Profitable companies buying back stock is a great sign, but we should always question why we are being presented with an opportunity that appears juicy. Perhaps the explanation is in something that Gator Capital wrote about in its October letter; a lack of generalists interested in the bank sector. With that valuation and that much excess capital, and a management inclined to repurchase shares, there seems to be a good chance that shares recover to where they were pre-covid. We also very much like the signal of bankers announcing share repurchases – not just the implications for individual banks but for the sector as a whole. They can see what is happening with their borrowers and they have decided to spend capital on accretion instead of hoarding it.
OBN - Small Banks - Issue 32 (November 2020) by Nate Tobik on Scribd
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