U.S. THRIFT: BANK STOCKS

Excellent “value” opportunities exist among community bank stocks and U.S. thrifts, as they typically have low downside risk and strong appreciation potential.

The U.S. Thrift portfolio is comprised of previously converted thrifts as well as deposit accounts in mutual banks, which give Polaris valuable preferential rights to purchase stock if the mutual institution converts to stock ownership. The bank stocks in the portfolio, typically smaller thrifts and community banks, are broadly diversified geographically. Many of the portfolio holdings have footholds in multiple markets and neighboring states.

OUTLOOK FOR BANK STOCKS AS OF 06/30/17

As Polaris predicted, the Federal Reserve’s latest Fed Funds rate hike did not have much of an impact on the yield curve, and did little to improve bank net interest margins (NIMs). Instead, loan growth will be the near-term driver to prod bank earnings higher. While loans and leases on bank credit are unlikely to keep their rapid pace of recent years, a strong U.S. economy should spur demand for new loan originations. Many of our portfolio holdings are reporting loan growth. We will be carefully analyzing this metric, along with banks’ operating conditions, NIMs and balance sheets in the coming months. For more information about the U.S. Thrift portfolio, please contact Polaris directly.


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