Our special focus this week is on Western Banks- obviously a tough sector in these turbulent times. As part of our series of “Off the Record” comments, we asked the CEOs and analyst that we interviewed to give us their personal picks.

One of them this week  simply couldn’t:

“To tell you the truth, I can’t think of any banks that I’d recommend, truly. They seem to have done some things just because they wanted growth and near-term earnings. They have loaded the banks up with real estate and you do that, eventually you are going to get caught, and sure enough, they are caught in a market that could absolutely destroy the banks. I see that over and over again, especially in California and I just think it’s wrong. There are probably some good banks around, but for me to give you a name now, I don’t think I could. Many of us, including myself, can be very impatient and we want what we want now. So, if these executives have a challenge to grow the bank and they are looking for returns, where better to put money than in real estate? And California, that’s a very easy thing to do. They are not thinking that the value of a bank is in its core deposits and they fund themselves with money that is far more expensive. They think there is such a margin in real estate that they don’t have to worry about the core deposits. But eventually that catches up with you. Many of the banks are changing their philosophical outlooks but I’m afraid they’ve entrenched themselves in the real estate market to such an extent that we are going to see a lot more problems in the banking industry before this is done.”

Others had a few ideas:

Centennial Bank (Owned by LandAmerica (LFG)):

 ”There’s a small bank in Orange County called Centennial Bank, which is owned by LandAmerica. This is a non-duplicable kind of operation in the sense that they
run with so few people, I don’t even know how they stay alive. They have an amazingly efficient place.”

CVB Financial (CVBF)

“I think CVB Finanicial, the holding company for Citizens Business Bank, has an excellent management team and you can point to the fact that they are in the Inland Empire; they’re headquartered in Ontario, California, and so far have had no credit issues whatsoever. As an example of how their strong management has proved out in the current environment, they have not been aggressive with construction and the company has done well, which I believe will continue to be he case. So CVBF would be one name that I would mention.”

“CVB Financial is a name I’ll mention. This company has managed to steer away from significant credit problems even though they are based right in the heart of the Inland Empire. Because they didn’t go substantially into residential construction lending, they’re taking an opportunity to try to become more bank-
like in terms of their product offerings and their marketing outlook. I like that one.”

For the full off the record article on Western Banks, including a variety of other stock picks in this turbulent time, click here.  

This entry was posted on Tuesday, July 8th, 2008 at 3:35 pm and is filed under Financial Services Stocks. You can follow any responses to this entry through the RSS 2.0 feed.