The numbers have been crunched, the data analyzed, and now the winners can be revealed.
How We Choose
We analyze our group of 32 banks across a number of performance and market-related metrics and use a proprietary scoring algorithm to assign ratings to individual banks and defined industry segments. The derived score is based on both absolute and relative performance and is used to rank each company relative to its industry sector and to inform our valuation estimates and projections. We examine banks in three primary sectors – Super Regional, Regional and Super Community. The definitions of these sectors and a listing of the banks we follow can be found on the home page of our website. Every year, we name our top-rated banks in each sector and an overall champion. And now that fourth quarter results are in and analyzed, we can report the long-anticipated results.
Our Three Sector Winners
Industry Sector | Winner | Runner Up |
Super Regional | M&T Bank (MTB) | U.S. Bank (USB |
Regional | Western Alliance (WAL) | Comerica (CMA) |
Super Community | Bank OZK (OZK) | Umpqua (UMPQ) |
All three of our top ranked banks are new to the podium this year, although Bank OZK was a very close runner up last year in the Super Community category. We also have identified the losers in each category. However, because we choose to accentuate the positive, the ranking of all of the banks we cover (including the losers) is only available to subscribers of our in-depth reports.
These banks have several factors in common that contribute to their performance – they run traditional business models, perform extremely well on the basics, and deliver consistent and sustained results through a variety of economic cycles. In our view, the key attribute that connects these three companies is focus – they know what they do well and don’t get distracted or dissipate resources by chasing hobby businesses or unfamiliar markets. This is a testament to what we consider to be strong, experienced, and effective management teams in all three banks. While performance on various metrics varies, each of these companies is ranked at or above average on every metric we analyze and leads their sector in a few key categories. It is also not surprising that they all rank first in Net Interest Margin. This shows that they rigorously manage their balance sheet mix and pricing.
Highest Ranked Metrics
MTB | WAL | OZK |
NIM (1) | NIM(1) | NIM (1) |
EPS Growth (1) | 5 Year ROE (1) | Efficiency Ratio (1) |
Asset Growth (1) | Asset Growth (1) | ROA (1) |
| ROA (2) | 5 Year ROE (2) |
And The Winner of the Coveted RJR Trophy is …
… M&T Bank. We have named M&T as our overall 2022 champion and the winner of the coveted RJR trophy. Headquartered in Buffalo, New York, nobody has ever accused M&T of being flashy or trendy. They are innovative where it counts and traditional when required. They know how to grow and manage their business and they rarely get in trouble by doing stupid things or extending their risk profile by chasing unfamiliar businesses, products or markets. They are able to grow both by acquisition and organically and have extended their footprint by expanding into contiguous markets through smart and well-priced acquisitions. Importantly, they have proven themselves to be a quality acquirer and have improved the performance of every franchise they bought. We were very bullish on their most recent acquisition of Peoples United that closed (finally) towards the end of 2021 and raised our expectations and price targets in the alert we sent our members when the acquisition was completed. Members can obtain a copy of that Alert on the Member's Hope Page. We’ll even forgive them for buying the naming rights to the Baltimore Ravens’ stadium.
Does the Market Care?
In a perfect world and with an efficient market, we would expect our ratings and rankings to translate into higher market multiples and stronger market performance. And, often it does, but not always. We use our scoring algorithms and proprietary valuation model to set a target price for each of our companies’ stock. We don’t really expect to call the price with precision but we use it to assess whether we believe the company is overvalued, undervalued or fully valued relative to the banking sector and market as a whole. At the beginning of the year, we identified WAL and OZK as undervalued and MTB as fully valued. As the charts show, each of these companies took different paths throughout 2022 with MTB performing above benchmarks for most of the year, while WAL and OZK underperformed by a significant margin. This, combined with our performance assessment and their historical market performance led us to designate both as undervalued and, in a sense, on sale. As the chart shows, the market performance of all of these banks has significantly outpaced the sector index since the beginning of 2023..
Top Rated Banks -- 12 Month Market Performance
Top Rated Banks -- YTD Performance
What Do the Analysts Say?
We typically don’t care what the analysts say but sometimes it can be instructive to assess market sentiment. In this case, we are more optimistic about the short to intermediate appreciation prospects of WAL and OZK, than of MTB, although the latter is our 2022 champion. The chart below shows current prices relative to both ours and the consensus analyst target. While we believe that MTB may appreciate, we believe it will be in line with overall sector and market conditions, rather than because they are undervalued currently.
RJR vs Analyst Price Targets
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