As if it wasn't enough that banks brought about the collapse of the financial markets and ushered in an economic recession out of which we still haven't climbed, now it's been laid bare that Wall Street has been manipulating the interest rates we all pay to further line their pockets. Of course, if they didn't have politicians in Washington running interference for them, allowing them to make a profit at our expense, it wouldn't have played out as it did.
Yet like people who think the only good lawyer is their own, customers continue to prop up and support those financial institutions that have profited most from their involvement in the schemes to make sure that no matter how things go, they come out on top. Despite the beating bank stocks have taken, JPMorgan Chase, Bank of America, and Goldman Sachs still enjoy broad levels of CAPS support.
Of course, not every bank is evil and some were hurt just as much by the market's collapse and have taken the steps necessary to repair their business and financial statements.
Bank on it
One such bank was regional giant Synovus Financial
Two years ago, Synovus was teetering on the brink and brought in a new CEO who scrubbed the decks and made the regional bank financially shipshape. Like fellow regional banking concern Regions Financial
Yet it still has over $1 billion in nonperforming assets and $1.6 billion in construction and real estate development loans, the latter of which accounted for 22% of the total commercial real estate portfolio and 7.8% of the total loan portfolio. It's headed in the right direction, but Synovus could still founder should the housing market turn for the worse again. So while its Tier 1 ratio of 13.19% is more than adequate, its core capital levels of 6.8% tangible common equity isn't nearly as strong as it ought to be. And according to Fitch Ratings, Synovus still hasn't repaid nearly $968 million in TARP bailout money and has more TARP funds outstanding than any other bank. That puts it ahead of troubled Puerto Rico banking giant Popular
I've rated Synovus to outperform the broad market indexes on CAPS. While I'm an admitted Gloomy Gus when it comes to continued weakness in housing, I think the regional bank is doing what's necessary to restore good order, and while risks abound I think it will continue on the path it has set. But let me know on the Synovus Financial CAPS page or in the comments box below if you think the bank will soon be able to take a well-deserved holiday.
Plowshares into swords
You might want to throw the likes of New York Community Bancorp
As my Foolish colleague Matt Koppenheffer points out, NYB's simple banking plan makes loans on apartment buildings in New York City, typically on units that are "low-risk, below-market-rent properties, and are generally just 10-year loans." And though it may look like it has a high ratio of NPAs to loans, a cursory glance misses the fact that many of the loans came through its purchase of AmTrust Bank. The FDIC has agreed to cover 80% of covered loans up to a certain point, and then 95% of the losses beyond that. While I might object to the taxpayers having to foot that bill, it makes for a smart business decision on NYB's part.
New York Community also offers up a tasty dividend that's currently yielding 7.9%, which makes the 2.5% yield at Huntington Bancshares
Well, maybe not rock. It is a niche player so its ability to enjoy any rip-snortin' growth is limited. And as Matt also pointed out, because it does offer a healthy dividend, it limits the amount of money it has available for lending purposes. Still, a steady performance is welcome in these volatile times, and I've also rated NYB to outperform the markets.
That puts me in good company with folks like hskinnemoen, who says, "Trading below book value with a massive dividend. Seems like it's being punished for what JPM did, which is just totally unfair and irrational; in other words, a great buying opportunity."
Let me know in the comments section below or on the New York Community Bancorp CAPS page whether you believe it embodies the thinking of "simple is as simple does."
The ball's in your court
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