Regionals Priced to Zero

Today is a fine day for the Pacwest Bancorp, higher by more than 7% for the session. But what exactly do the price declines of recent portend? Is it, dare I say, a forbidding a near term doom or perhaps an adjustment of book value based on the new realities of the business?

I can say with certainty that it is RARE to see banks re-price and just prod on as if nothing ever happened. Bond holders will at some point DEMAND a merger.

So what banks are in danger right now? This is an easy thing to assess, even an idiot, such as yourself, can make this determination by simply looking at price to book ratios. In layman’s terms, the PB is what analysts use to study banks — not price to sales or price to earnings as you would say Apple.

Here are the banks that I’ve found lacking in the P/B department, courtesy of Stocklabs.

NOTE: ANYTHING LESS THAN 1 IS CONSIDERED CHEAP. LESS THAN 0.5 IS IMPAIRED, AND LESS THAN 0.25 IS PRICING IN COLLAPSE.

stock/pb
PACW 0.19
FFWM 0.22
FRBK 0.26
CUBI 0.39
EGBN 0.48
BKU 0.52
WAL 0.56
ALLY 0.57
TFC 0.61
KEY 0.64
FHN 0.64
COLB 0.69
ZION 0.7
EBC 0.76
LNC 0.79
CMA 0.81

What does it all mean? Nothing, really — other than the fact that Wall Street thinks the above banks are shit. It’s your call now to determine whether there is value now or this is a precursor to something much bigger.