By a lot of metrics, Westamerica Bancorporation (NASDAQ:WABC)
has a legitimate claim to being one of the best banks in the country,
or at least one of the best small-cap banks. This Northern
California-based bank produced numbers during the credit
crisis/recession that were better than what many banks produce today,
and the bank's service-oriented approach to business banking has made it
a strong player for business deposits within its footprint.
But
there's an ironic twist to this narrative. A lot of what has made
Westamerica so good, particularly its rigorous underwriting discipline,
is weighing heavily on the bank today. Credit quality is still
excellent, but loans have declined at a double-digit rate for five years
running and a shocking amount of the company's asset base is invested
in securities because management can't find worthwhile loan
opportunities. With that, valuation is a mystery to me. Even if I were
to assume that ROE could double over the next five years, I don't see
the path to today's valuation.
Follow this link for more:
Westamerica Bancorp Struggling As A Supreme-Quality Bank In A Lower-Quality World
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