I've been comparing banks in PBCT's section in Value Line. PBCT's p/e is much higher than the others (e.g. NYB) but other metrics appear better (e.g. price/book , price/deposits) and PBCT kept raising the dividend throughout the fiscal implosion. In fact, it appears that earnings do not even cover the dividends. I know that I am missing something between the top and bottom lines that accounts for this bifurcation. Can anyone explain it? Thanks.
Dividends do not require earnings. Dividends require cash. The PBCT bashers feel excess cash is a problem. Since when is cash a negative.If the macro economy picks up, PBCT will have cash to invest. If the macro economy contracts, PBCT has cash to last out the downturn.Anybody familiar with New England Banking Markets will confirm that PBCT is a major player.Strong Buy.
If you're benchmarking PBCT with NYB and come out with the conclusion that NYB is more undervalued by looking at the metrics then you're financial accumen needs to be polished up.
NYB has 18 billion in debt. With PBCT you're earning roughly half of NYB earns and with an enterprise value(Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents) of 2.5 billion.
NYB has an enterprise value of 18.65 billion dollars with roughly double the earnings of PBCT.
This means you're paying roughly 8 times the valuation for NYB with 2x the earnings. No thanks!
On top of that NYB has exposure to Florida & NY while PBCT core portfolio is in CT where the housing market is stable and didn't increase during the housing boom and didn't decrease much during the crash.
Believe me, I know very well that my financial acumen needs constant polishing! Learning is a lifetime process and with "the market" sometimes you have to unlearn what you've learned and vice-versa. Even George Soros says that some of his nest moves were made "doing the wrong thing at the right time." I'm trying to get a handle on the most important metrics in evaluating banks at this point in the economic cycle. What matters most: Book Value? Dividend Growth? Enterprise Value? Capital Levels? Growth Opportunities? (Re: NYB- They only moved into Florida and Arizona via FDIC assisted takeovers when the FDIC was giving once in a lifetime deals. Buy low-sell high? Time will tell.) Back to my basic question: When will PBCT bring the bucks to the bottom line? Does it even matter if they do?