Profitability for Texas Banks Superior to Other Regional Banks Due to Growth, Good Deposit Franchises and Credit Metrics

Wall Street Transcript

67 WALL STREET, New York - March 6, 2013 - The Wall Street Transcript has just published its Pacific and Southwest Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Regulatory Obstacles and Fee Income Replacement - Interest Rates and Loan-Growth Strategies - Pockets of Growth in Western Banking - Regulatory Outlook Gains Clarity

Companies include: Texas Capital BancShares Inc. (TCBI), Viewpoint Financial Group (VPFG) and many more.

In the following excerpt from the Pacific and Southwest Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: How are valuations for these stocks trending overall, and what's your expectation for the year in terms of total returns?

Mr. Milsaps: Speaking to Texas specifically first, the banks there continue to trade at a premium to other community banks nationwide, and again for the reasons I outlined. I think you have scarcity value. A lot of banks want to be in Texas, so it keeps the valuations of these franchises relatively high because people think they could be acquired.

Two, profitability is superior to other places because of the growth, good deposit franchises and credit metrics. So they trade at well-deserved premiums, which could mean that other bank stocks around the country may have more upside simply because they have more levers in terms of credit getting better and growth opportunities improving.

I would say generally we feel pretty good about bank stocks in 2013. They've certainly had a nice move year to date, but our sense is that many of our clients are still underweight, and the stocks, relative to where they have been historically, are still relatively inexpensive.

We think you can still find good values out there, particularly considering that the industry has healed itself in terms of repairing capital, and also asset quality metrics have gotten so much better. These are really the two bank killers, so to speak. You can muscle your way through a tough interest rate environment, higher overhead costs, etc., but when you have capital and credit concerns, it's really tough for the stocks to perform well. I think with those generally out of the way, it removes a huge overhang off the sector...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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