US Bancorp 2.05 01/21/2025

US Bancorp

Credit, Finance/Real Estate


Publicly traded companies mentioned herein: Comerica Inc (CMA), Truist Financial Corp (TFC), US Bancorp (USB)

Highlights

The presenter is more bearish on the regional banks than consensus, noting that similar to the First Republic pre-collapse, there are several banks that are under capitalized in terms of true BV relative to stated BV. When analyzing the market’s pricing for deposit betas and increases in deposit costs, consensus assumptions don’t seem tied to historical reality, especially when looking at 1995 – 1999 and 2004 – 2006. Therefore, there are tail risk opportunities for investors who expect the banking crisis to continue worsening. For example, it seems like US Bancorp (USB) is considered too big to fail by most market participants, but analyzing its BV, backing out intangibles, and adjusting for unrealized losses leads him to believe there is minimal book equity. Furthermore, the yield on its assets is mediocre. For those reasons, he is short the 2.05% January 2025 bonds of USB, which is where he sees the most asymmetric risk/reward. 

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Idea Discussion

Commentor 1 - 2 weeks ago

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