You're watching...
Tangent Capital Partners Senior Managing Director Christopher Whalen on why community banks may be a better investment than large banks.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Are ditching their accounts a big banks and moving to the refuge of smaller financial institution this.
According to a new study by JD power and -- you are.
Next guest says you should be doing the same only with your investments joining us now is Chris -- he's senior managing director.
At tangent capital so you believe more of the small and midsize banks.
Simply because we're seeing that rush that moved from the big guys to the smaller people for when it comes to bank account.
I don't know if it's interesting we actually helped to enable that wouldn't Ariana Huffington started to move your money movement a couple years ago we provided a free tool that lets people look up could banks but zip code so.
-- cut of pleased to see the slow migration it's still not -- -- -- the big banks.
But I think what what I've been saying consistently since the crisis is -- -- businessperson or consumer and you need critical talked a little thing -- your community that you've never talked to.
Go open a checking account and told what you mean because a little things to regionals are in a much better position -- today the more aspects are.
Now if you're interested in investing in the movement if you believe in the small banks that and that that they will come back you have to pick the winners from the losers you do because.
There -- thousand banks that you say are in trouble maybe a third of those will go under so how do you judge which are good which are not.
Will play -- other firm institutional risk analytics rates every bank in the country so it's fairly easy for us to -- would -- on -- on what basis do you -- the operating performance we don't care about the stock price we care about whether you make money.
Do take to a truce too little risk generally the small banks are under risks they have double digit risk adjusted returns to do very well.
In comparisons with the big banks if you realize that the big banks are heavily subsidized.
By the government.
Once you take out the subsidies to take up the effect of the cartel would have in the secondary market for home loans.
Big banks -- profitable -- more profitable and little by X effect if you look at the risk they take on Wall Street.
Over the counter derivatives things of this -- They're less profitable.
But can they afford to abide by the Dodd-Frank laws and we have -- McDonald last week talking about hey watch out with a small and midsize bank -- -- -- -- That they're trying to get -- a to a separate tier with Dodd-Frank understandably though it costs a lot to to adhere to certain rules but that might be worried that investors should look at perhaps.
Well the large banks have the biggest problem from Dodd-Frank.
Once you get them US Bancorp they don't have it available for sale book they don't have a broker dealer.
They basically repaid they lend money they have a big trust department so the Dodd-Frank yes is it gonna be -- a hard.
Thing for small small institutions to deal with yes but the ones who were saying that the little banks have to seller mostly consultants who want to work on -- -- transactions ago bless them.
But I like little -- now we are gonna get rid of a couple of hundred institutions still receive the next two years because they didn't have good business models.
But there's an awful lot of banks in -- 94% of -- all FDIC insured banks.
We're bloat and let's dollars let's just mentioned a couple of P.
m.s PNC financial -- guys -- -- US Bancorp suntrust up.
There I'm surprised to see suntrust there also and trust as a recovering story.
For pay 23 they have few years they were consuming only in Coleman made from interest.
Fixing the bank.
They could -- -- pay back their TARP.
They were to scuttle slowly working their way out of amassed now they're actually looking pretty good we rate of -- -- and by hello -- it to -- the prices cheap right now.
Well it is cheaper more to the point suntrust to give us a very stable business model what -- -- -- less survivors of Georgia unfortunately.
And over time they're gonna get back to where they want to be which is -- They don't have a Wall Street dorm they don't trade derivatives that's all good to boring is growth or you don't thank you very idea very -- of the -- both good to have.
