Carver Bancorp: Looking For Evidence Of Market Top? This May Be It

seekingalpha2021-07-13

Summary In four decades of banking, I have never seen anything as looney as this: A “Triple F” bank soared 141% during the past week and 308% YTD. Knowing a good thing when he sees it, the third ...

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Comments

hongweiheng
2021-07-22
hongweiheng
Super shorted n now seem dead.
Cknight2021
2021-07-13
Cknight2021
Liked
BotaKal
2021-07-13
BotaKal
Shorted to heck ?
leezy
2021-07-13
leezy
Yess
richcat
2021-07-13
richcat
Like and comment
Damien111
2021-07-13
Damien111
Like n comment
- syleo:
  ?

Leave a comment

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This May Be It\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-07-13 16:19 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4438815-carver-bancorp-this-may-be-evidence-of-market-top><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nIn four decades of banking, I have never seen anything as looney as this: A “Triple F” bank soared 141% during the past week and 308% YTD.\nKnowing a good thing when he sees it, the third ...</p>\n\n<a href=\"https://seekingalpha.com/article/4438815-carver-bancorp-this-may-be-evidence-of-market-top\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"CARV","symbol_name":"卡弗储蓄","start_time":0,"source_url":"https://seekingalpha.com/article/4438815-carver-bancorp-this-may-be-evidence-of-market-top","article_id":"1129519319","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1129519319","pubTimestamp":1626164343,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nIn four decades of banking, I have never seen anything as looney as this: A “Triple F” bank","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"CARV":"卡弗储蓄"},"translate_title":"卡弗·班科普：寻找市场顶部的证据？这可能就是它","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CARV":0.9},"content_text":"Summary\n\nIn four decades of banking, I have never seen anything as looney as this: A “Triple F” bank soared 141% during the past week and 308% YTD.\nKnowing a good thing when he sees it, the third largest shareholder sold all his shares last week in this marginally unprofitable bank.\nWhen the stock prices of the market’s least profitable companies act weird and big shareholders prudently exit large positions, we may be seeing evidence of a market top.\nRecord-high market valuations have spooked me for a while.\nWhen a perennially underperforming bank sees its valuation match industry leaders, it is time for me to reduce equity exposure and take profits in non-taxable accounts.\n\nStock Price Action - Carver Bank\nHaving been in the banking industry 41 years, I thought I saw everything until this past week.\nCheck out two price charts for Carver Bancorp, Inc. (CARV). On July 7th, this $676 million New York City bank closed around $10 a share. By July 9th, the stock jumped to over $40 a share before closing the day at $26.50, up 21% for the day and 141% for the week.\nYear-to-date Carver is up 308% after ending 2020 at $6.49 a share.\n\nWhat's the Story?\nThe story is there is no story.\nAt least not a compelling one for investors.\nAccording to www.thestreet.com, the catalyst for Carver's climb was asubreddit called r/carvstock that described Carver as \"blasting up\" and \"$CARV to the moon\" as two reasons to buy shares in this this small bank with 3.468 million shares.\nCarver Since 1994\nThe moon is 238,855 miles from earth which is about as far as Carver's stock price has fallen since 2003 when it peaked at $397.50 compared to $26.50 at market close on July 9.\nA Rare \"Triple F\" Bank\nRegular readers of my articles know that I focus on banks.\nAs a rule, I write about great banks and deliberately avoid writing about poor performers. Life is too short to own a bank that cannot produce a consistent and durable return on equity that exceeds its cost of capital.\nWhile I would prefer to not write about underperforming banks that persistently fail to achieve returns sufficient to cover their cost of capital, I need to make an exception with Carver given its crazy recent price action.\nCarver's soaring stock price may be telling a much bigger story than what meets the eye. We may be seeing evidence of what happens to a high-flying market when an industry's habitually worst performers see their valuations inflate five times over historic average.\nIn my database of 274 banks that have traded publicly since 2004, Carver is one of only three banks to earn a \"Triple F\" for Risk-Adjusted Return on Equity over 16 years, 10 years, and 5 years. To qualify for this distinction, a bank must be among the bottom 5% of all banks in Risk-Adjusted Return on Equity for all three timeframes.\nHere is a chart reflecting FDIC data showing the quarterly Net Income after Taxes and Return on Equity for Carver since 2003. During the past year it has lost $3 million, past 10 years $28 million, and since 2003, $38 million. The bank's average Return on Equity since 2003 is -3.7%, and for the past ten years it has an average Return on Equity of -4.6%. Profitability has not improved during the past year or for the quarter ending March 31, 2021. During the past decade the bank has paid no taxes; in fact, it shows $26,000 in net refunds during this time.\n\nNet Interest Margin trends are unfavorable. Net Interest Margin is shrinking as Yields have declined at a faster rate than the improvement in Cost of Funds. Net Interest Margin as of quarter ending March 31, 2021, is 78 basis points below the average since 2003. The big drop is driven by a 166 basis point decline in the Yield of its assets.\nThe bank's Efficiency Ratio is improving but remains among the worst among all US banks. See the orange line in the chart below. A principal drag on the poor Efficiency Ratio is the bank's Non-Interest Expenses (blue line) which remain unfavorably elevated in comparison to peers.\n\nThere is good news as Net Loan Charge-offs have stabilized over the past decade as seen below from the blue line. Before getting too excited about improving credit quality, there are reasons to think the charge-off ratio could go south soon.\n\nThe bank's Texas Ratio hit a five-year high at the end of Q1 2021 (29.6 per Bankregdata)\nThe percentage of Non-Performing Assets at the end of the recent quarter was the highest in three years (2.12% per Bankregdata).\nTotal delinquent loans were 7.13% on March 31; not good.\n\nI could go on and review other factors that raise concern (like percentage of brokered deposits, loan mix that tips heavy to non-owner real estate, commercial real estate concentration), but I will stop here.\nLofty Valuation Not Justified\nAs of July 9, CARV is selling at a Price to Tangible Book Value of 3.46, up from 1.34 at the end of June and .65 as of September 30, 2020. These numbers compare to about 2.0 Price to TBV for the industry, a number rich in my view but in line with the 20-year average. On a good day, Carver's fair value is 1.0 to 1.2 Price to TBV. Good times are almost certain to not last for the shareholders who jumped on CARV this past week; a reversion to the historic average valuation seems inevitable.\n\nCarver's 3rd Largest Shareholder Sells\nCarver’s third largest shareholder knows that the bank's days of lofty valuations are temporary. On July 8 he filed anSEC reportshowing he no longer owns any CARV shares. AJune SEC filingindicated he owned 153,438 shares, equivalent to about 5% of the company.\nRisk Tolerance, Final Thoughts\nMy favorite macro-charts flash market valuation warnings:\n\nMarket Cap to GDP (Buffett's preferred market valuation chart)\nS&P 500 dividend yield/earnings yield\nShiller CAPE ratio\n\nEach investor needs to draw his or her own conclusion about their appetite for risk in today's lofty market. Individual equity selection and portfolio construction require extra due diligence when stock indices consistently reach new highs.\nSpecific to Carver, the risk of an imminent collapse in valuation appears high. Of course, it is remotely possible that Carver is on the brink of a major announcement that has leaked into the market, but that is a dubious proposition. Even a merger would not produce a valuation close to where Carver ended the day on July 9.\nAs for me, I do not want to exaggerate the influence of one small bank on my tolerance for risk, but at the same time, when viewed across the landscape of record and near-record market valuations, Carver Bank's nutty recent jump in price is one more factor forcing me to ask if the market is about to run out of gas?\nIt has been a great run since March of last year. I plan to cash in some chips this week in my non-taxable accounts and prepare for a correction that may or may not occur later this year.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":176570881,"gmtCreate":1626910049243,"gmtModify":1703480254709,"author":{"id":"3585739539967013","authorId":"3585739539967013","name":"hongweiheng","avatar":"https://static.tigerbbs.com/6fde04922e3db18da83e28ebfb025743","vip":1,"crmLevel":1,"crmLevelSwitch":0,"authorIdStr":"3585739539967013","idStr":"3585739539967013"},"htmlText":"Super shorted n now seem dead.","listText":"Super shorted n now seem dead.","text":"Super shorted n now seem 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to heck ?","listText":"Shorted to heck ?","text":"Shorted to heck ?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/142466621","repostId":1129519319,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":142497513,"gmtCreate":1626166108232,"gmtModify":1703754665026,"author":{"id":"3576721262021344","authorId":"3576721262021344","name":"leezy","avatar":"https://static.tigerbbs.com/6c248af0e9e1e971324ff3f9720fc898","vip":1,"crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"3576721262021344","idStr":"3576721262021344"},"htmlText":"Yess","listText":"Yess","text":"Yess","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/142497513","repostId":1129519319,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":142499618,"gmtCreate":1626165636034,"gmtModify":1703754652283,"author":{"id":"4089010991436220","authorId":"4089010991436220","name":"richcat","avatar":"https://static.tigerbbs.com/68e4b3561331a0d9fe709291122e6cea","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"4089010991436220","idStr":"4089010991436220"},"htmlText":"Like and comment","listText":"Like and comment","text":"Like and comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/142499618","repostId":1129519319,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":142570988,"gmtCreate":1626164500544,"gmtModify":1703754620722,"author":{"id":"3581590268956264","authorId":"3581590268956264","name":"Damien111","avatar":"https://community-static.tradeup.com/news/79328dd256df8bc25949678982e26fc3","vip":1,"crmLevel":6,"crmLevelSwitch":1,"authorIdStr":"3581590268956264","idStr":"3581590268956264"},"htmlText":"Like n comment&nbsp;","listText":"Like n comment&nbsp;","text":"Like n 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