Updated with comments from FBR analyst Paul Miller, Guggenheim analyst Marty Mosby, and market close information for JPMorgan Chase. NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) and Wells Fargo ( WFC) would possibly see major deposit market share gains if Bank of America ( BAC) were to eliminate its branch presence in Texas, as part of an emergency plan in the event of a capital shortfall. According to a report in the Wall Street Journal -- which cited unnamed sources -- Bank of America included a scenario of retreating from certain markets in the event of a capital shortfall, among a list of emergency scenarios submitted to the Federal Reserve last year. Bank of America declined to comment on the Wall Street Journal article, or on its branch network or discussions with the Federal Reserve. Tom Brown, CEO of hedge fund Second Curve Capital and a well-known bank analyst said in an interview on Bloomberg Television in December that he and Bank of America board member Chad Gifford had been "batting back and forth" the notion of BAC selling part of its branch network, with Texas being cited as an example. FBR analyst Paul Miller said that "Brian Moynihan did not become CEO to break up this company," but that if the shares were to slip back below $5 and stay there for some time, "there would be other assets they could sell; I don't expect them to be selling branches any times soon." Miller did say that if the company felt pressed to do so, "they could carve out the old Bank of America on the west coast, or a Texas bank." Guggenheim Securities analyst Marty Mosby said that in presenting the branch-sale contingency plan to the Fed, Bank of America was "not considering this as a base scenario," but was showing a " backdrop of excess capital hidden from the balance sheet that it could use on a rainy day. " This type of branch sale would be expected to fetch a higher price than the 0.6 times tangible book value that Bank of America's shares traded for when they closed Thursday at $6.79, according to HighlineFI. So who would be the winners if Bank of America were to exit the Lonestar State? According to the Federal Deposit Insurance Corp.'s most recent deposit market share data, JPMorgan Chase Bank NA ranked highest in Texas, with $96 billion in deposits as of June 30. Bank of America NA was in second place, with $77.7 billion in deposits, and Wells Fargo Bank NA ranked third, with $51.2 billion in Texas deposits. Another Wells Fargo Subsidiary, Wells Fargo Bank South Central NA of Houston, had the sixth-place Texas market share, with $16.7 billion in deposits.
USAA Federal Savings Bank had the fourth-place market share with $43.8 billion in deposits, followed by Compass Bank which is held by Banco Bilbao Vizcaya Argentaria SA ( BBVA), and had $26.0 billion in Texas deposits as of June 30. Frost National Bank of San Antonio -- a unit of Cullen/Frost Bankers ( CFR) -- had the seventh-place Texas market share, with $15.2 billion in deposits, followed by Capital One, NA (held by Capital One Financial ( COF)), in eighth place with $9.1 billion in Texas deposits. While it is highly speculative even in light of the Journal article to consider which companies might benefit the most from a Texas branch sale by Bank of America, a competitive bidding process for coveted deposits in a region with a relatively strong economy would possibly light a fire under Bank of America's shares. Over the relatively short , Capital One might seem an unlikely bidder for Texas branches, because it expects to make two major acquisitions during 2012, including the purchase of ING Direct from ING Groep ( ING) for $6.2 billion in cash and 55.9 million common shares, which is expected to be completed this quarter, and the purchase of HSBC's ( HBC) U.S. credit card portfolio for an estimated premium of $2.6 billion. Capital One expects to raise between $750 million and $1.25 billion in common equity to complete the second deal. Capital One is scheduled to report its fourth-quarter results on Jan. 19 after the market closes, and analysts polled by Zacks.com expect the company to post fourth-quarter EPS of $1.53. JPMorgan Chase expects to increase its return of capital to investors, through additional share buybacks and a dividend increase, after the Federal Reserve completes its latest round of stress tests. While JPMorgan disappointed investors with fourth-quarter earnings of 90 cents a share, slightly behind the consensus estimate of 92 cents, pushing the shares down 2.5% to close at 35.92, the company reported a very strong year-end Basel 1 Tier 1 common equity ratio of 10.0%, indicating that branch purchases could be considered in the event of a BAC catastrophe. Wells Fargo is scheduled to announced its fourth-quarter results on Tuesday before the market opens, with analysts polled by Zacks.com estimating earnings of 72 cents a share. The San Francisco holding company's Tier 1 common ratio was also strong, at 9.35% as of Sept. 30, and as the most profitable among the "big four" U.S. banks, with a return on average assets (ROA) ranging between 1.12% and 1.29% over the past five quarters through Sept. 30, Wells Fargo is poised for further expansion, despite doubling in size from its Wachovia acquisition in December 2008.
Cullen/Frost reports its fourth-quarter results on Jan. 23, with analysts expecting earnings of 88 cents a share. The company reported a tangible common equity ratio of 9.01% as of Sept. 30, and has also been a strong earnings performer, with ROA of 1.15% of higher over the past five quarters. Cullen/Frost's shares were trading at a relatively high two times tangible book value as of Thursday's market close at $55.84. Sterne Agee analyst Brett Rabatin rates the shares "Underperform," and said on Friday that "unless loan growth accelerates, we believe results will likely bring concerns about
net interest margins and profitability going forward in the low-rate environment and potential pressure on consensus expectations going forward." Rabitin's comments make the point that Cullen Frost may not covet deposit growth in the current environment, however, loans could be sold along with branches in the event of a capital shortfall at Bank of America. -- Written by Philip van Doorn in Jupiter, Fla. To contact the writer, click here: Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.