RE:RE:Some 300 US banks are at risk Good reference Donwaan....
We need to put this number of 300 into perspective and also make an assessment as to whether this will impact our investment in FTN. And if so - how.
First of all there are there are approximately 5000 banks in the US. This is separate banks, not the total number of bank branches. So while 300 may seem like a big number to Canadians especially since there are only 35 banks in Canada, it is not really a big number in the US context. The other point is that the banks in the US that are at risk are small local and community banks. As an example, in 2021, 250 US banks failed. The average asset base of these failed banks was 85 billion - not a big number in a US context and the total assets of these banks compared to the total US banking system is a very small percentage of the total - much smaller than ratio of the number of banks.
None of the failed banks are owned by FTN. In addition, what normally happens in the US is that the big banks swallow up the assets of these small failed banks for pennies on the dollar and actually become richer and more dominant. This means that for investors in FTN, the 300 potential bank failures referenced in the article may well actually strengthen the big banks that FTN owns and this is actually a good news story for people invested in FTN.
All that said, if what the article talks about results in a systemic downturn in the US economy then for sure an investment in FTN will be affected as will any common shares that you own. Since FTN is a levered investment vehicle, it will be affected more than most other equity investments. So this is something to keep an eye on for sure.