Saturday, August 25, 2018

Bay Banks - Interesting Opportunity, But A Lot Of Work To Do

Investors have hundreds of bank stocks to choose from, and within that pool you can find a story to fit almost any preferred investment strategy. In the case of tiny Bay Banks of Virginia (OTCQB:BAYK), the opportunity here revolves around leveraging the Virginia Commonwealth acquisition to gain more low-cost deposits and gain share in the fragmented Richmond and Virginia Beach markets, while also pivoting towards a more commercial-oriented lending mix and building up the fee-generating treasury and asset management operations.

Although these shares have sold off since second quarter earnings, they’re still not all that cheap on a standalone or peer basis. I like the opportunity Bay Banks has to generate above-average growth from improving its deposit composition, gaining loan share in underserved markets, and leveraging its enhanced scale, but not enough to stretch for this stock today.

Readers should also note that Bay Banks has less than ideal liquidity, though the company is pursuing a NASDAQ listing, and that should ultimately improve liquidity.

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Bay Banks - Interesting Opportunity, But A Lot Of Work To Do

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