Financial stocks have taken a beating recently. But banks that operate in certain regional areas tended to stand out in my earlier examination of smaller banks. Let's use this information to determine which bank might be the beast of the Northeast.
What is the Northeast?
The American Northeast is generally considered the six New England states plus New York, Pennsylvania, and New Jersey. Regional leader M&T Bank (NYSE: MTB ) is headquartered in Buffalo, N.Y., and has branches in Pennsylvania, Maryland, and Delaware. Independent Bank (Nasdaq: INDB ) does business primarily in Massachusetts under the name Rockland Trust.
Screening factors
We'll rank and average the banks based on four factors: P/E ratio, P/B ratio, dividend yield, and net income margin. Only banks with a market cap of more than $300 million will be included.
My first screening will eliminate all banks without earnings over the past 12 months, looking for the cheapest bank according to this metric. My second factor is P/B ratio. In the banking industry, a value of 1.5 is reasonable, and the adage I like is "buy at a half, sell at two." Only banks that pay a dividend will be included -- the higher the better. My initial screen turned up 18 names, so I refined my screen to include banks with more than a 3% dividend yield. That resulted in the following 12.
|
Company |
P/E Ratio (TTM) |
P/B Ratio |
Dividend Yield |
Net Income Margin |
|---|---|---|---|---|
| M&T Bank | 9.9 | 0.95 | 4.0% | 25.1% |
| Community Bank System (NYSE: CBU ) | 11.8 | 1.16 | 4.5% | 24.0% |
| S&T Bancorp (Nasdaq: STBA ) | 12.4 | 0.79 | 3.6% | 23.2% |
| Valley National Bancorp (NYSE: VLY ) | 12.6 | 1.38 | 6.5% | 24.2% |
| TrustCo Bank Corp (Nasdaq: TRST ) | 11.3 | 1.27 | 5.9% | 20.5% |
| Washington Trust Bancorp (Nasdaq: WASH ) | 11.6 | 1.16 | 4.4% | 20.9% |
| First Commonwealth Financial (NYSE: FCF ) | 10.8 | 0.50 | 3.3% | 14.0% |
| NBT Bancorp (Nasdaq: NBTB ) | 11.2 | 1.19 | 4.3% | 20.4% |
| Tompkins Financial (AMEX: TMP ) | 11.6 | 1.34 | 4.0% | 21.8% |
| Hudson Valley Holding (NYSE: HVB ) | 12.5 | 1.00 | 4.8% | 18.2% |
| Oritani Financial (Nasdaq: ORIT ) | 23.7 | 1.10 | 3.1% | 33.0% |
| Average of All Banks in Region | 39.2 | 0.92 | 2.8% | 10.0% |
Source: FinViz.com, TTM = trailing 12 months.
M&T Bank started in 1856 and is now one of the largest 20 banks headquartered in the United States. Valley National rode a high yield and impressive income margin to the top half of the list, overcoming the lowest P/B and a high P/E. Independent Bank was near the bottom in dividend yield but still managed to nab a top three spot because of a low P/E.
Regional opportunities abound!
Other Fools point to great values in some of the larger banks, and I couldn't agree more. However, there are many great opportunities in some of the regional banks. I'll be paying special attention to M&T Bank and adding it to My Watchlist. Feel free to do the same.
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Report this Comment On October 10, 2011, at 11:47 PM, JimmyBobBoy wrote:
From personal experience, M&T is one of most conservative banks in this area. They will only loan to people who can pay back. They did not need TARP money, but had to take it per the US Gov't so they did not stand out against other banks. A very solid compeditor.
Report this Comment On October 12, 2011, at 1:02 PM, buffalonate wrote:
M&T Bank isn't even the best bank in its city. First Niagara Financial Group has gone from about 114 branches to around 450 next year in just the last few years. M&T Bank has only increased deposits over that time about 40%. I own both stocks but First Niagara has much more upside due to the acquisitions. Both of them remained profitable thoughout the crisis.
Report this Comment On October 12, 2011, at 1:31 PM, XMFGuruEbby wrote:
First Niagara is another bank that I like, but they are technically categorized as a savings & loan. Otherwise they probably would have been here.
Thanks for reading!
TMFGuruEbby
Report this Comment On October 12, 2011, at 2:36 PM, buffalonate wrote:
You could have called First Niagara a savings & loan several years ago but that is a hard argument to make now. After they make their branch acquisition from HSBC USA in a few months they will be the 33rd largest bank in the country with operations in 4 states. They also have one of the 50 largest business insurance brokerages in the country. They are also now getting more heavily into commercial loans. I own stock in M&T Bank and First Niagara because they are 2 of the best run banks I know.
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