I like it that nobody seems to agree on Commerce Bancorp
Like so many other quarters from Commerce Bancorp, this one mixed the good and bad news. The "good" was that the company again posted exceptional loan and deposit growth while it also produced double-digit growth in both net interest income and non-interest income. The "bad" was that expenses led to no real growth at the bottom line, and valuable ratios such as return on assets, return on equity, and net interest margin continue to sink.
Even the bank's most ardent critics have to acknowledge that Commerce is currently a deposit-gathering machine. Core deposits rose more than 24%, and that's the kind of growth that a bank such as National City
It's also important to note that Commerce is unusual in how it manages its balance sheet. Most banks have some amount of securities on the balance sheet, but at Commerce, securities outnumber loans almost 2 to 1. And though it's true that those securities are outyielding the deposits that pay for them, it's also true that the cost of those deposits is rising faster than the yield on the securities.
Perhaps I'm stubborn in holding to more traditional ways of valuing and analyzing banks, but I don't see why I should abandon an approach that has made me plenty of money in the past. After all, no single stock is likely to be worth scrapping an otherwise profitable system. With that in mind, I'll continue to sit on the sidelines and watch this story develop. After all, it's not often that you see this much growth and controversy in a banking name, so it's likely to be a volatile name for some time to come.
For more bankable Foolishness:
National City is a Motley Fool Income Investor recommendation. If you're looking for a safe place to deposit your investing dollars, check out Income Investor free for 30 days, and we'll guide you toward some of the market's best dividend-payers.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
More from The Motley Fool
With a Tax Deal in Place, Canada Is 1 Step Closer to Legalizing Recreational Marijuana
Canada just cleared a major hurdle in its efforts to make adult-use weed legal.
Delta Picks the Airbus A321neo Over Boeing's 737 MAX
Last week, Delta Air Lines completed a long-awaited order for next-generation narrowbody planes. But its decision may have had more to do with engines than with the aircraft themselves.
Tariff Threat Already Taking a Bite Out of Solar Installations
Solar installations in the U.S. were down in the third quarter. There's one big reason.