Bank stocks retreated in January as the U.S market adjusted down due to slower growth in emerging markets, U.S. monetary policy and political problems in Turkey, Argentina and Ukraine. As a result, large publicly traded banks retreated in step with the broader market while banks $1billion and less maintained their values. The SNL U.S. Bank Index declined 2.7% in January 2014 but the index for banks between $1 billion and $5 billion dropped nearly 5% outpacing the S&P 500 which dropped 3.6% in January. Banks between $500 million and $1 billion actually gained 2.5% in value while banks less than $500 million improved 1% during the month.
Despite the January adjustment, bank values remained well above their January 2013 values. The SNL U.S. Bank Index was up an impressive 25.8% since January 2013, as the S&P 500 gained 19% during the same period. The SNL U.S. Bank index for banks $1 billion to $5 billion posted a 30% increase while the smaller banks posted gains of approximately 20%.
REGIONAL PRICING HIGHLIGHTS
Public banks in the West represented the only region which gained value on a price to tangible book basis in January 2014 which continued the trend from June of 2013 posting the largest gain among the regions on strong capital, strong earnings and net interest margin. Western banks narrowed the gap between banks in the Southwest which continued to receive the strongest pricing on a tangible book and earnings basis. Southeastern banks continued to improve in value and outpaced banks in the Midwest and Mid-Atlantic for the first time several years.
PRICING BY SIZE
Financial institutions over $5 billion continued to see pricing multiples in excess of 1.50x tangible book and 15x last twelve months earnings as they reported the strongest earnings on assets between 0.97% to 1.07%. While banks less than $500 million reported the highest net interest margins, they reported the lowest return on assets at 0.53x on a last twelve month basis as a result of lower non-interest income levels and higher overhead expenses.
More information regarding nationwide M&A activity can be found here.