5 Banks At Risk of a Commercial Real Estate Double Dip
Shares of Bancorp South (BXS) are down 24% year to date.
Shares of BancorpSouth (BXS) are down 24% year-tp-date.The bank, which like Synovus is also operates in the SouthEast, has faced deteriorating credit quality with total nonperforming loans increasing to 4.61% of net loans and leases in the first quarter from 2.43% in the year ago quarter. BancorpSouth had commercial real estate loans worth $4.05 billion or 321% of its capital at the end of the first quarter. Nonperforming CRE (construction and commercial mortgages) loans at the end of the first quarter totaled accounted for 22% of capital. "With 12% of total loans being C&D and 19% of these loans currently nonperforming, the bank currently has $886 million of performing C&D loans, very high, in our view, given only $921 million in TCE(Tangible common equity) at YE10," JPMorgan analysts said in a note last month. "We also note that 74% of BXS's C&D loans are scheduled to mature in 2011, which we believe adds substantially to the bank's riskprofile. Although many banks are now in the process of restoring dividends, given the size of a stressed C&D portfolio at BXS relative to total capital and seeming near-term earnings power (which we peg in the range of $0.01 to $0.07 per share over the next several quarters), we believe this was the driver of the Board's recent decision to cut the dividend yet again." On April 29, the company announced it would cut its quarterly dividend from 11 cents to a penny, which the management said was done to better preserve BancorpSouth's strong capital position. There are no buy ratings on the stock. 13 analysts have a hold rating, while only one analyst has a sell call on the stock.
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