Last earnings season banks were peppered with an endless stream of questions about their readiness for an economic downturn. This time around investors will press to find out how much they profited from it.
Some bank executives will have at least one reason to crow.
Buybacks — or the lack of them — are expected to be a hot topic in earnings calls next month, industry experts say. The collapse in bank stocks, driven by
-
Kelly King, the North Carolina company's chief executive, also noted that BB&T is busy integrating a number of recent acquisitions. It is leaning toward buying back stock, though management could be coaxed into making a deal if the right bank became available.
February 10 -
Bankers appear set to get their long-awaited rate rise, but the top executives of the biggest banks still have lukewarm expectations for the coming year, according to forecasts laid out by the top brass from JPMorgan, Wells Fargo, PNC and others.
December 8 -
Their top executives sure don't. Income streams are constrained in every business line, the economic picture remains murky, and big banks are talking about cutting more expenses again.
March 8 -
The market correction and likely longer timeline for a Fed rate rise have sent some overly optimistic investors to the door, and now prices are closer in line with the fundamentals. That's setting the stage for a bounceback in some of the biggest banks' stocks and may ease pressure on them coming into third-quarter earnings season.
August 28 -
Stock repurchases have increased in popularity among banks. Large institutions like Chase and Citi and smaller banks like First Horizon have or are considering open market repurchase programs.
October 27
has put buyback strategies to the test: while some banks moved quickly, buying shares when prices bottomed out in February, others may have missed the boat.
"I think there's going to be pressure, at a minimum, to have an authorization in place," said Chris McGratty, an analyst with Keefe, Bruyette & Woods. "If you don't, you are flat-footed" when prices fall.
Banks must receive approval from their boards before buying shares. The authorizations specify how much a bank can buy, and they can stay in effect for several years.
Having an authorization ready to go is important during a downturn, when other options to deploy capital — such as
Some banks will face tough questions next month about how aggressively they moved when prices tumbled, according to Kevin Fitzsimmons, an analyst at Hovde Group.
"If you have a buyback in place, and you say you're going to use it when your stock is at a good value," then February would have been an opportune time, Fitzsimmons said.
Over the past few weeks, a handful of banks have disclosed information about first-quarter buybacks. Banks typically discuss buybacks on quarterly calls with analysts and investors.
Columbus, Ga.-based Synovus has purchased $106 million in shares since the beginning of the year after buying $43 million in the fourth quarter, the company said recently. It approved a $300 million buyback in October.
"The pace has certainly picked up throughout the first quarter," Kessel Stelling, chief executive at the $28.5 billion-asset bank, said at a March 7 investor conference.
Additionally, Associated in Green Bay, Wis., bought about $20 million of its own stock in January, the company
"There's a threshold point where you say — You know what? Might as well just buy back the stock," Chris Niles, chief financial officer at the $27.6 billion-asset company, said at a Feb. 11 conference.
The disclosures come as the stock market has begun to rally, following a steep, downward spiral that began late last year.
During the first six weeks of 2016, the KBW Nasdaq Bank Index dropped nearly 30%, to a three-year low. The collapse outpaced
The collapse raised doubts about
Markets have rebounded lately; the Dow Jones average on Thursday turned slightly positive for the year. But most bank stocks are still trading below fourth-quarter levels.
"We had a roller-coaster type of movement in the stock market," Fitzsimmons said. But, he added, the decline presented a "real opportunity" for some banks to buy their own shares.
Buybacks, of course, can be a boon. Besides providing an additional option for deploying capital, they can boost the value of a company's stock, by lowering the total number of shares outstanding.
During earnings calls in January — when the market was beginning to collapse — several banks said they planned to move aggressively if prices stayed low.
"I think our stock is so ridiculously low right now we can't help but to buy back the amount that we said we would," said David Zalman, CEO at Prosperity Bancshares in Houston, which authorized a buyback of 5% of its common shares in January.
Zalman said the $22 billion-asset bank does not typically repurchase shares — it prefers, instead, to use capital
A slew of other banks have either authorized buybacks or said they would keep the option on the table.
JPMorgan Chase on Thursday increased its repurchase program by $1.88 billion, after receiving approval from the Federal Reserve. The company last year authorized a $6.4 billion buyback. Bank of America and Capital One also recently announced buyback programs.
Other such banks include: the $26 billion-asset First Horizon in Memphis; the $22.7 billion-asset Hancock Holding in Gulfport, Miss.; the $8.7 billion-asset Boston Private Financial Holdings; and the $3.5 billion-asset Southside Bancshares in Taylor, Texas.
"We're not going to set a price out there or anything, but right now ... we feel like it is prudent to make an investment in our stock," Southside CFO Lee Gibson said during a January earnings call.
A key challenge for banks is working around blackout periods, Fitzsimmons said. Banks are prohibited from buying stock immediately before and after a market announcement.
That made it tricky to take advantage of the February market rout. Stock prices bottomed out on Feb. 11, shortly after fourth-quarter earnings announcements.
"At the end of the day, it's a relatively small window," Fitzsimmons said.
Still, some banks have found a workaround. For instance, State Bank Financial in Atlanta has an agreement in place, known as a
Meanwhile, banks have also disclosed insider buybacks by senior executives. After the Feb. 11 market plunge, JPMorgan CEO Jamie Dimon
Buybacks will continue to be a key focus for banks as stock prices remain low.
"There are plenty of banks that, I think, have the capital flexibility to do it," McGratty said.