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($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
It’s snowing today. I need to run out and buy milk. I need to run out and buy bread. Oh my goodness, look how much milk and bread costs! There is so much inflation. How do we put a stop to it? One simple solution. Raise interest rates. What happens when you raise interest rates? U.S. regional banks are poised for increased revenues as loan growth pops in 2022. Fed rate hikes in 2022 will create net interest margin expansion.
Bank stocks in general did pretty well last year, up about 40% on the back of anticipated rate hikes in 2022. As the economy has recovered as we have waded through the pandemic, PE multiples for banks have become more generous. That’s like free money since the banks don’t have to prove it with earnings as the market anticipates their successes. The Federal Reserve is expected to lift interest rates 3 times in 2022, but they haven’t done it yet. The first few rate hikes are usually the most beneficial for banks since the loan rates go up faster than what they pay out on their deposits, so there are several months of juicy margins. There is no doubt we will see double digit earnings growth.
Well, we can’t buy all of them, so which one looks the best right now? Today I bought stock in Metropolitan Commercial Bank (ticker MCB) at 110.72. I will sell it in 4 to 6 weeks at 127.89. Here’s why I really like this stock:
What an awesome chart! This stock is up 178% over the last 12 months yet its PE is only 15.3. That’s a great growth AND value story. And why not? Metropolitan Commercial Bank is proud to announce that it has been included in Fortune’s 100 Fastest-Growing Companies for 2021. Metropolitan Commercial Bank provides a broad range of business, commercial and personal banking products and services to small and middle-market businesses, public entities and affluent individuals in the New York metropolitan area. Start spreading the news! Founded in 1999, the Bank is headquartered in New York City and operates six locations in Manhattan, Brooklyn and Great Neck, Long Island.
Sitting in this sweet spot, strong loan growth trends should continue, which will of course improve overall profitability levels consistent with strong revenue growth. The bank has seen incredible growth of more 50% in assets and 20% in loans in the last year which has pumped up its book value. If they can continue this loan growth and, on top of it fortify this growth with the interest rate margin they get from Fed activity, their earnings will be pornographic. One would think that with this loan growth, their customer profile must have become sketchy, but that’s not true at all. Their credit recoveries have actually improved with their increased activity. Only 0.4% of their commercial real estate loans are past due. That’s pretty crazy given the work from home craze which has dominated New York City during the pandemic. The answer is a lot of these loans are for properties such as multi family residences, nursing homes and warehouses. Deposits are 4 times higher than they were 4 years ago. All of this will be a rising tide for the MCB stock price.
If you have to ask what is it that differentiates MCB from a lot of other banks, the bank is a fintech partner bank. They are one of the first movers in this space. They also have some glancing interest in crypto but they have risk management guard rails in place for these investments. Note, Revolut is a customer. This is reflected in their profit margin of 33% and their Return on Equity of over 12%. It’s no surprise that over the last 4 quarters they have beaten ANAL-yst estimates by over 10% each time.
Despite all of the talk about urban flight, stats don’t back it up and the smart guys are all saying that NYC population growth will be on the upswing through the decade. At the end of the day, a bank’s interest income is correlated to GDP per capita, so you grow the population and the bank benefits. The other trend that bears notice is that companies are reluctant to go public these days, on account of all of the scrutiny and the amount of capital in the vaults of private equity. Banks benefit from this privatization of businesses since bank loans are now the life blood of cash flow for small growing businesses.
So what is the earnings story? Most recently:
Here’s what the chief had to say:
Mark DeFazio, President and Chief Executive Officer, commented, "Our strong third quarter performance continues to showcase that we are a top performing growth company with a sustained history of driving net income, ROATCE and shareholder value. We have done this with a laser-focus on the funding side of our balance sheet, while driving high quality loan growth with minimal net charge-offs since our founding 22 years ago. Today, we have grown to over $6 billion in assets and combine a strong commercial bank with a uniquely positioned Global Payments business. Our success would not be possible without the enthusiasm and dedication of the entire MCB team. A huge thank you to our employees, our board and to our clients. I have stated that we are a top-performing growth company and now Fortune agrees.”
The Giants are terrible and so are the Jets but when it comes to Big Apple it is all about the Benjamins. MCB will take $$$MR. MARKET$$$ to the pay window….bank on it!
It’s snowing today. I need to run out and buy milk. I need to run out and buy bread. Oh my goodness, look how much milk and bread costs! There is so much inflation. How do we put a stop to it? One simple solution. Raise interest rates. What happens when you raise interest rates? U.S. regional banks are poised for increased revenues as loan growth pops in 2022. Fed rate hikes in 2022 will create net interest margin expansion.
Bank stocks in general did pretty well last year, up about 40% on the back of anticipated rate hikes in 2022. As the economy has recovered as we have waded through the pandemic, PE multiples for banks have become more generous. That’s like free money since the banks don’t have to prove it with earnings as the market anticipates their successes. The Federal Reserve is expected to lift interest rates 3 times in 2022, but they haven’t done it yet. The first few rate hikes are usually the most beneficial for banks since the loan rates go up faster than what they pay out on their deposits, so there are several months of juicy margins. There is no doubt we will see double digit earnings growth.
Well, we can’t buy all of them, so which one looks the best right now? Today I bought stock in Metropolitan Commercial Bank (ticker MCB) at 110.72. I will sell it in 4 to 6 weeks at 127.89. Here’s why I really like this stock:
What an awesome chart! This stock is up 178% over the last 12 months yet its PE is only 15.3. That’s a great growth AND value story. And why not? Metropolitan Commercial Bank is proud to announce that it has been included in Fortune’s 100 Fastest-Growing Companies for 2021. Metropolitan Commercial Bank provides a broad range of business, commercial and personal banking products and services to small and middle-market businesses, public entities and affluent individuals in the New York metropolitan area. Start spreading the news! Founded in 1999, the Bank is headquartered in New York City and operates six locations in Manhattan, Brooklyn and Great Neck, Long Island.
Sitting in this sweet spot, strong loan growth trends should continue, which will of course improve overall profitability levels consistent with strong revenue growth. The bank has seen incredible growth of more 50% in assets and 20% in loans in the last year which has pumped up its book value. If they can continue this loan growth and, on top of it fortify this growth with the interest rate margin they get from Fed activity, their earnings will be pornographic. One would think that with this loan growth, their customer profile must have become sketchy, but that’s not true at all. Their credit recoveries have actually improved with their increased activity. Only 0.4% of their commercial real estate loans are past due. That’s pretty crazy given the work from home craze which has dominated New York City during the pandemic. The answer is a lot of these loans are for properties such as multi family residences, nursing homes and warehouses. Deposits are 4 times higher than they were 4 years ago. All of this will be a rising tide for the MCB stock price.
If you have to ask what is it that differentiates MCB from a lot of other banks, the bank is a fintech partner bank. They are one of the first movers in this space. They also have some glancing interest in crypto but they have risk management guard rails in place for these investments. Note, Revolut is a customer. This is reflected in their profit margin of 33% and their Return on Equity of over 12%. It’s no surprise that over the last 4 quarters they have beaten ANAL-yst estimates by over 10% each time.
Despite all of the talk about urban flight, stats don’t back it up and the smart guys are all saying that NYC population growth will be on the upswing through the decade. At the end of the day, a bank’s interest income is correlated to GDP per capita, so you grow the population and the bank benefits. The other trend that bears notice is that companies are reluctant to go public these days, on account of all of the scrutiny and the amount of capital in the vaults of private equity. Banks benefit from this privatization of businesses since bank loans are now the life blood of cash flow for small growing businesses.
So what is the earnings story? Most recently:
- Total revenues of $46.7 million, up 29.8% from the prior year period and 8.2% from the prior linked quarter.
- Net income of $16.2 million, up 50.4% from the prior year period and 21.6% from the prior linked quarter.
- Loans totaled $3.6 billion, up 20.5% from September 30, 2020 and up 17.8% annualized from June 30, 2021.
- Deposits were $5.5 billion, up 54.7% from September 30, 2020 and up 12.8% annualized from June 30, 2021.
- Diluted earnings per share of $1.77, up 39.4% from the prior year period and 14.2% from the prior linked quarter.
Here’s what the chief had to say:
Mark DeFazio, President and Chief Executive Officer, commented, "Our strong third quarter performance continues to showcase that we are a top performing growth company with a sustained history of driving net income, ROATCE and shareholder value. We have done this with a laser-focus on the funding side of our balance sheet, while driving high quality loan growth with minimal net charge-offs since our founding 22 years ago. Today, we have grown to over $6 billion in assets and combine a strong commercial bank with a uniquely positioned Global Payments business. Our success would not be possible without the enthusiasm and dedication of the entire MCB team. A huge thank you to our employees, our board and to our clients. I have stated that we are a top-performing growth company and now Fortune agrees.”
The Giants are terrible and so are the Jets but when it comes to Big Apple it is all about the Benjamins. MCB will take $$$MR. MARKET$$$ to the pay window….bank on it!
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