Post by
Obscure1 on Mar 19, 2023 11:59pm
Another shoe drops... and a new twist
New York Community Bank bought substantially all of Signature’s deposits and a total of $38.4 billion worth of the company’s assets. That includes $12.9 billion of Signature’s loans, which New York Community Bank purchased at a steep discount -— it paid just $2.7 billion for them. New York Community Bank also paid the FDIC stock that could be worth up to $300 million.
So, we have another purchase of assets (this time in America) for $0.20 on the dollar. What that really means is that the buyers are placing a value of 20 cents on the dollar for bond portfolios that are offside.
AND a new twist whereby the FDIC collects a VIG of up to $300 million
I hope that everyone who thinks Canadian banks are immune to bond maturity mismatches and are not offside in the bond portfolios are correct. Given that the FED and our supposedly infallible Bank of Canada failed to provide proper guidance about inflation a year ago, I don't know how bond portfolios can't be offside.
Even if Canadian banks are made of Teflon as many here suggest, it qouls mean that they don't have any significant amount of undeclared bond losses (which are supposed to be restated quarterly) in their investment portfolios. Never in Canada EH!
I don't think we have seen the end of the bad news. In fact, I have to wonder if we are just seeing the tip of the iceberg as the focus is putting out the fire in the waste basket as opposed to long term effects.
Even if Canadian banks are squeaky clean, I still expect they will experience a drop in P/E multiples before this is over.
I don't have a dog in this fight, but maybe it takes an observer to see things.