More Key Banks At Risk Of Failing Stress Tests
Stern Agee has decided to “stress test” the new Stress Tests under the Dodd Frank regulation. The current rate calls for banks with $10 billion or more in assets to get this test and there are currently 63 publicly traded banks with consolidated assets over $10 billion in assets and the firm lists an additional six more with assets between $9 and $10 billion.
These banks are expected to submit their stress test results by January 5, 2013 with an “as of” on September 30, 2012, with the formal results potentially being made public by early April 2013. Stern Agee has focused on the middle-market banks with assets ranging in the $8 billion to $50 billion range. Stern Agee put these at risk due to current and expected issues such as capital, profitability, payout ratios, concentration risks, funding risks, and credit risks.
The bank named those potentially more at-risk as being: Valley National Bancorp (NYSE: VLY), Synovus Financial Corporation (NYSE: SNV), New York Community Bancorp Inc. (NYSE: NYB), Astoria Financial Corporation (NYSE: AF) and TCF Financial Corporation (NYSE: TCB).
We have broken out the dividend payout ratios and shown an expected return on assets. The average (mean) payout ratio for dividends is only 27% for 2013 and the average (mean) expected return on assets for 2012 is expected to be 0.92%. The average (mean) loan/deposit ratio is 85% and all five of these top at-risk banks are above that. The five most at-risk banks are as follows:
Valley National Bancorp (NYSE: VLY) has an estimated dividend ratio of 84% in 2013 and it is expected by Stern Agee to have a return on assets of 0.93% in 2012. The loan/deposit ratio is 101.9%.
Synovus Financial Corporation (NYSE: SNV) has an estimated dividend ratio of 23% in 2013. Stern Agee sees Synovus posting a return on assets of 0.46% in 2012. Synovus’ loan/deposit ratio was put at 90.2%.
New York Community Bancorp Inc. (NYSE: NYB) has an estimated dividend ratio of 93% in 2013 and Stern Agee sees this bank having a return on assets of 1.07% in 2012. The loan/deposit ratio is a very high 133.6%.
Astoria Financial Corporation (NYSE: AF) has an estimated dividend ratio of 25% in 2013. Astoria is expected to post a return on assets of 0.29% in 2012. Astoria’s loan/deposit ratio was put at a high 118.4%.
TCF Financial Corporation (NYSE: TCB) has an estimated dividend ratio of 17 % in 2013. It is also expected to have a negative return on assets of -0.07% in 2012. TCF’s loan/deposit ratio was put at a high 118.9%.
Ranked from sixth place to tenth place on Stern Agee’s list is…
- 6) Susquehanna Bancshares, Inc. (NASDAQ: SUSQ)
- 7) Privatebancorp Inc. (NASDAQ: PVTB)
- 8) F.N.B. Corporation (NYSE: FNB)
- 9) Wintrust Financial Corporation (NASDAQ: WTFC)
- 10) Flagstar Bancorp Inc. (NYSE: FBC)
As a reminder, just because a bank is deemed more at-risk of not living up to the new stress does not assure that failure is certain. Banks can sell off loans, they can raise new capital, they can grow earnings, they can halt dividend payout progressions, they could get a large inflow of deposits, and there are many other factors to consider.
JON C. OGG