Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg Television contributing editor, discusses the outlook for the banking industry. Brown speaks with Betty Liu, Sheila Dharmarajan and Adam Johnson on Bloomberg Television’s “In the Loop.”
For those who are not familiar with Brown: GuruFocus ccolumnist CanadianValue had a good article on him talking about one of his investment mistakes. It contains two paragraphs on Brown’s achievements:
In the interview, Brown expressed general optimism towards the banking industry. He said "credit is getting better", and the banks of various sizes are getting better with their balance sheet, with the larger banks further along the path.
Brown commented on the impact of the new Basel Rules which requires lower capital ratio than expected. He sees major consolidation across the banking industry in the coming years, at scale greater than what the industry saw in the 1990s. However, he does not see the biggest four banks acquire smaller banks as they are already deemed “too big to fall”, rather, they will have to spend the capital overseas if they want to expand. So the consolidation will be regionals eating up the smaller banks or the regionals get together.
At the end of the short interview, Brown mentioned that he likes and owns Banner Corporation (BANR, Financial) which is profitable and sold at half the book value. Brown stated that in long run, banks tend to be sold at 1.5 times to twice of their book values.
(Source: Bloomberg)
For those who are not familiar with Brown: GuruFocus ccolumnist CanadianValue had a good article on him talking about one of his investment mistakes. It contains two paragraphs on Brown’s achievements:
By 2006 Tom Brown of Second Curve Capital was pretty widely known as the premier analyst of financial stocks in the United States. Brown took a $130,000 contribution from his father in 1984 and by investing in virtually only financial stocks turned it into $18 million by the early 2000s. That is a two decade run compounding money at around 40% per year.
Brown also became one of the most respected Wall Street analysts of financial-services stocks in the 1980s and 1990s, working at Smith Barney, PaineWebber and Donaldson Lufkin & Jenrette. In 1998, he joined hedge-fund manager Julian Robertson, heading Tiger Management's North American financial-services group. In 2000, he formed Second Curve Capital, a $550-million-in-assets hedge fund that invests exclusively in financial-services stocks.
In the interview, Brown expressed general optimism towards the banking industry. He said "credit is getting better", and the banks of various sizes are getting better with their balance sheet, with the larger banks further along the path.
Brown commented on the impact of the new Basel Rules which requires lower capital ratio than expected. He sees major consolidation across the banking industry in the coming years, at scale greater than what the industry saw in the 1990s. However, he does not see the biggest four banks acquire smaller banks as they are already deemed “too big to fall”, rather, they will have to spend the capital overseas if they want to expand. So the consolidation will be regionals eating up the smaller banks or the regionals get together.
At the end of the short interview, Brown mentioned that he likes and owns Banner Corporation (BANR, Financial) which is profitable and sold at half the book value. Brown stated that in long run, banks tend to be sold at 1.5 times to twice of their book values.
(Source: Bloomberg)
