November experienced more volatility with pricing up on healthy earnings reports, then reversed course on foreign exchange fines for the big banks followed by a month-end drop on a continual decline in oil prices.
The SNL Bank Index remained relatively flat increasing just 0.6% in November, well below the S&P 500 growing by 2.5%. Banks below $500 million improved the most increasing 2.6% while Banks between $1 billion and $5 billion declined 2.1% after growing 8% in October. The SNL Bank Index for banks between $500 million and $1 billion kept pace with the overall SNL Bank Index remaining relatively flat, shifting up just 0.5% during the month.
A review of the past twelve months, shows significant volatility from November 2013 through June 2014 that generally leveled off during the summer then returned in September through November 2014. Over the past twelve months, the Bank SNL Index lagged the S&P 500 growing 8.9% compared to the S&P 500 increasing 14.5%. The smallest banks, those below $500 million, were the most competitive growing 11.8% while banks between $1 billion and $5 billion were the least competitive declining 1.3%. Banks between $500 million and $1 billion tracked higher moving up by 7.1% over the last twelve month period.
REGIONAL PRICING HIGHLIGHTS
Following an improvement in pricing in October, bank stocks were down in each region during November but reported mixed results since June 2014 with half of the regions lower. On a price to tangible book basis, the Southeast (6.2%) and the Midwest grew (2.7%) while the West remained generally flat (0.4%) and the Mid-Atlantic (-4.3%), Northeast (-3%) and Southwest (-3.4%) declined since June 2014. Looking at price to earnings, the Mid-Atlantic was the only region to decline (-1.4%) since June 2014 on LTM earnings while the Southwest grew the most (15.3%) followed by the West (7.1%), Northeast growing 6.1%, Midwest up by 4.4% and the Southeast increasing by 2.5%.
The Southeast Region showed the greatest improvement since June 2014 on price to tangible book (8%) trading at 1.38x in November, up from 1.30x at June 2014 and reported 16.1x LTM earnings up from 15.7x LTM earnings at June 30, 2014.
The Southwest and Western Regions were the best performing regions and generally reported the highest tangible equity levels, LTM ROAA and LTM Net Interest Margin while the Northeast generally reported the lowest tangible capital and LTM Net Interest Margin and the Southeast reported the lowest LMT ROAA.
The Southwest continued to report the highest price to tangible book multiple (1.79x) and highest price to earnings (17.8x) but reported the largest drop in price to tangible book (3.4%) while price to earnings shot up 15.3% since June 30, 2014.
The next highest pricing was in the West with a price to tangible book multiple of 1.53x, remaining stable compared to 1.53x at June and a price to LTM earnings of 16x, up from 15x at June and matched price to LTM earnings in the Southeast region which reported the lowest return on assets.
PRICING BY SIZE
Public bank pricing by size of institution showed banks below $1 billion reporting a slight increase on a tangible book multiple and were mixed on a price to LTM earnings basis while banks over $1billion reported a decline on a price to tangible book basis but improved on LTM earnings multiples. Banks below $1 billion reported price to tangible book of 1.08x while the SNL Index for banks over $1 billion reported a price to tangible book multiple ranging from 1.41x to 1.84x. On a LTM earnings basis, banks below $1 billion reported price to earnings of approximately 13x while banks over $1 billion reported a price to LTM earnings between 15x and 17x.
The larger financial institutions typically reported the highest LTM ROAA levels and lowest NPAs/Assets while the smaller financial institutions, those below $1 billion, reported lower earnings and slightly higher NPAs/Asset levels among banks by size.
More information regarding nationwide M&A activity can be found here.