Listened to the presentation and finally got an answer to their ultimate goal regarding the parent company. They intend to wind it down and put remaining capital in the bank. The timeframe for this would be post 2012 as the bank has sufficient capital for operations in 2011 and 2012. So, the bank is the whole deal.
The presentation provided a clear runway for understanding.
1. The bank is growing with good liquidity and good spreads.
2. The parent is basically provisioned and just has to be worked out.
3. The have a national middle market platform with new lines of business like equipment financing being developed.
It's really an old fashioned spread lending growth story, with some baggage that is being unloaded.
The parent has well over a billion in trapped equity. When that frees up and goes into the bank that is sufficient capital for another 8-10 billion in loans. At even a conservative spread of 4% that's another $400 million in earnings from the bank on top of the $200 million running rate today. That's roughly $2 per share. A PE of 12 and what will by then be a very decent dividend easily puts the stock back over $20. Hang on for another 2 or 3 years and never worry about working again.
I think those of us who went long a year ago in the depths of the craziness deserve a big congratulation. We were there long before the "experts" began their upgrades - of course after missing the first 500% gain. Gotta love the stock market.
In reality if there were this $2b in "trapped equity" it could be sold in the equity markets today. But it can't because mr market doesn;t value the valuations marks like cse mngmnt does.
Note that big banks like JPM,, BAC, and WFC, most likely use similar accounting for their valuation marks, so on a relative basis CSE is much cheaper compared to the big banks. Big banks get the higher market valuation though because of their TBTF govt backing status. Whether that TBTF govt money well has dried up due to political pressure remains to be seen. If a Resolution Authority bill is passed by congress a good pairs trade is long cse versus short WFC or BAC.