Not The Worst Banks

Revising our view on three banks we've bet against.

"You're thinking of this place all wrong, as if I had the money back in a safe. Your money's in Web3 innovations, it's in startups empowering women" —Delicious Tacos, riffing on the bank run scene in “It’s a Wonderful Life”.

Reconsidering Three Regional Banks

I placed bets against these three banks in part because Chartmill showed them having Piotroski F-scores in the distress zone:

1. Fulton Financial (FULT 0.00%↑)

2. First Financial Bankshares (FFIN 0.00%↑)

3. Ally Financial ( ALLY 0.00%↑)

Since then, I noticed an issue with the way Chartmill was calculating Piotroski F-scores: when it was temporarily missing data for one of the 9 Piotroski fields, it used a zero as a place holder, resulting in artificially low F-Scores for the three banks above (I’ve spoken to Chartmill about this, and they’ve since corrected the issue: when they have insufficient data going forward, they simply won’t display an F-Score for the stock).

To be sure, all three have other issues, including large amounts of underwater securities on their balance sheets, but according to our recent analysis on regional banks,

It doesn’t look like any of the three have exhausted the Federal Reserve’s new, post Silicon Valley Bank collapse assistance program, The Bank Term Funding Program (BTFP).

Why Settle For Less Than The Worst?

What I’ve done in response to this new information is lowered my limit prices on exiting the trades against these three banks, aiming for modest profits rather than maximum profits (I’ve already exited half of the FULT trade for a 168% gain). My view is that if we’re going to bet against banks, we might as well bet against ones with the highest risk of default (those that appear to have tapped out the BTFP). So I’d rather exit these trades sooner for more modest gains and put the money to work betting against weaker banks.