Title: "What Will Help My Stock?" Experts Ponder a Bank CEO's Question
Abstract: [ILLUSTRATION OMITTED] The president of a western community writes: Our board has been struggling with solutions to support our stock price. We are thinly traded, making money, and our asset quality is better than most. Unfortunately, the market price for our stock is hovering around 60% to 65% of book value, which does not compare favorably with other similar West Coast stocks that trade around 78% to 85% of book value or higher. In fact, one problem we have encountered is how to appropriately price a secondary offering. Looking for solutions, we have considered either a stock split or the creation of an ESOP to help solve this book-to-market price problem.--from Banker Suggestion Box on www.ababj.com We took this to experts. One common counsel was patience--especially since stocks in general have not been market favorites recently. There's no quick answer, says David Hogan, director of investor relations at First Financial Bankshares, an 11-bank holding company in Abilene, Texas, with $3.8 billion in assets. It will take time and effort to get your bank's message out and get your trading volume up. Hogan has written several articles on investor relations on www.ababj.com, including Questions Bank Investors Are Asking..., at http://tinyurl.com/bankinvest Above all, says Hogan, the key is having a good story to tell and management adept at telling it. How well solutions work depend on a bank's specifics, experts say. Being proactive is a strong beginning. Stock price is as much a sales, perception, and competitive challenge as is making loans or opening accounts. There are so many publicly traded banks, says Hogan, that a not on the radar of analysts and institutional investors must work at it. This is also a challenging time to hope to improve the bank's multiples, says Laurie Hunsicker, managing director at Stifel, Nicolaus & Co., who covers community banks and thrifts. She notes that price-to-book ratios seen now resemble the lows of the 1990s. Some experts suggest the board may need a reality check. Stifel, in a recent report, commented that bank multiples will likely continue to hover around the lower end of their historical ranges until credit costs return to more normalized levels and core earnings more closely approximate reported earnings per share. Interested want to own good-sized chunks of good banks in good markets, but at a discount to book, says Walt Moeling, advisor and partner at Bryan Cave LLC. The trick, he adds, is those interested buyers are comparatively rare. Since the 1980s, investors have concentrated on sectors. Many roll like pinballs from one sector to another, says Moeling. And right now, banking is a disfavored sector. Hence, an important audience to never forget is your current shareholder base, suggests Andy Mus, senior vice-president and partner at Marsh Communications, LLC, an investor relations consulting firm. Maintaining a consistent, positive message, but also maintaining honest and transparent channels to both prospective investors and current investors, is critical, says Mus. That will go a long way toward keeping your current investors on board and keep them from selling your stock. The following sections address hard strategies and soft strategies--efforts that support trading and price. Stock splits Experts' response: waste of time Research shows that stock splits have been ineffective at solving challenges like this bank's, notes Lynn Casteel, executive vice-president and managing director in charge of the investor relations practice at Travers Collins & Co. This bank's idea is to multiply the number of shares and then push the price back to where it was. But Casted says persuading the market to bid the price up again is very difficult. Most typically, unless the simultaneously releases tremendously good news, the market just discounts the split. …
Publication Year: 2011
Publication Date: 2011-09-01
Language: en
Type: article
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Cited By Count: 1
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