Friday, November 9, 2012

Private Equity In Bank Stocks: 13 Shine Out Of 25 Chosen

SNL Financial compiled a list of 25 major-exchange-traded U.S. bank and thrift stocks in which a private equity firm owns at least 10% of the common stock outstanding, according to FactSet Research Systems Inc. (here)

Of the 25 stocks, 13 have returned positively since the investment while 12 have lost value. For comparison, the SNL Bank and Thrift Index has lost 5.71% during the period since the earliest PE investment on SNL's list - Dec. 17, 2008 - through June 8.

Note Sageview Capital LP EverBank which bought out Tygris Leasing and is now active in equipment leasing and finance. There are others.

(Click to enlarge)

SNL Financial notes San Jose, Calif.,-based Bridge Capital Holdings' (BBNK) ($1.16 billion) common stock performed the best among the PE-owned institutions identified by SNL. A commercial lender started in 2001 to focus on the technology industry, Bridge Capital's stock has returned more than 245% since CCFW Inc., which does business as Carpenter & Co., completed a $30.0 million private placement with the bank in the fourth quarter of 2008. CCFW owned 32.2% of the bank's common stock, as of April 2, according to FactSet.

"On the other hand, if investors had followed Anchorage Capital Group LLC, Capgen Capital Group LP and The Carlyle Group LLC and bought the common stock of Norfolk, Va.-based Hampton Roads Bankshares Inc. (HMPR) ($2.13 billion), their losses would have been in the high double digits, " the report notes. "The common stock has lost 90.0% since Anchorage participated in a private placement on Dec. 28, 2010, and has lost 94.7% since Capgen and The Carlyle Group invested on Sept. 30, 2010."

Note that in this analysis, SNL has not calculated the PE firms' return on their investments. The return of the banks' common stock may have little correlation with the PE firms' ROI, since PE firms often buy ownership at a discount to open market prices or they buy preferred shares, convertible shares, warrants, rights or other types of securities. Rather, SNL is calculating the performance of the common stock on the open market while the PE firms owned parts of the companies.

Waterbury, Conn.,-based Webster Financial Corp. (WBS) ($19.13 billion) has also returned highly to common shareholders since Warburg Pincus LLC purchased $115 million worth of common stock, non-voting perpetual preferred stock and warrants in 2009. The stock has returned 90% since the transaction. Warburg Pincus has a stake of 16.1% in the bank, according to FactSet.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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