Nomura Securities on U.S. Banks: Turning Japanese v2 - NIMs Hunker Down

June 7, 2012 9:27 AM EDT
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Nomura Securities on U.S. Banks: Turning Japanese v2

Analyst, Brian Foran, said, "The 10-year treasury does not actually matter that much for banks – only mortgages are priced off of it, and even here mortgage rates have not matched the 10-year’s move. That said, the path of the US 10-year is now so consistent with Japan that it has refocused investors on the turning Japanese risk for US banks. Key themes: 1) Rates in 2013 tougher than 2012; NIM risk is higher the further out you look, assuming rates stay at these levels; 2) Loan growth matters most; If banks are able to produce mid single-digit loan growth, NIM compression will not be that bad."

Foran's list of Banks with Above Average NIM sensitivity:

Bank of America (NYSE: BAC), Hudson City Bancorp (Nasdaq: HCBK), Synovus Financial (NYSE: SNV), Zions Bancorp (Nasdaq: ZION), Citi (NYSE: C), First Horizon National (NYSE: FHN), Regions Financial (NYSE: RF), SunTrust (NYSE: STI), City National (NYSE: CYN), and Comerica (NYSE: CMA).

Foran's list of Banks with Below Average NIM sensitivity:

KeyCorp (NYSE: KEY), Western Alliance (NYSE: WAL), JPMorgan (NYSE: JPM), Huntington Bancorp (Nasdaq: HBAN), M&T Bank (NYSE: MTB), Capital One (NYSE: COF), BB&T (NYSE: BBT), Fifth Third (Nasdaq: FITB), PNC Financial (NYSE: PNC), Wells Fargo (NYSE: WFC) and U.S. Bancorp (NYSE: USB)

(To quantify NIM risk, the simple rule of thumb is 10bps lower NIM = 7% lower earnings, all else being equal)

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