When I last wrote about Sovereign, I complimented them on working diligently to rejuvenate its retail franchise, but I also questioned whether what they were doing was enough to build shareholder value and in the end I was not convinced it was sufficient.

So, I write with a heavy keystroke as Sovereign’s third quarter earnings were lackluster on one hand and frightening on the other.  The company pre-announced but still managed to surprise on the negative side.  Sovereign was not alone in this camp during the third quarter, as several other financial institutions pre-announced negative news and one company that I know of actually pre-announced twice!

Beyond the pre-announcement items, I was disappointed with core deposit generation despite SOV’s continued funding remix and mortgage baking revenues and pleased with core expense control, a stable NIM and an improved reserve ratio.  The early Halloween scare was the growth of the company’s indirect automobile portfolio …

During the third quarter 2007, the SNL Bank Index, SNL Thrift Index, and the NASDAQ Bank Index were down 4.3%, 7.5%, and 4.2%, respectively.  The third quarter of 2007 was volatile for the bank & thrift sectors.  The sub-prime woes which beset the market as we entered the summer season, dealt several more jabs before the summer was over.  Along the way several Central Banks were sent into the back rooms to open up the coffers for liquidity.  Even in these early days of the last quarter of the year, several large cap banks are meeting to set up a “fund” and it reminds us of the “good bad/bad bank” structure of the early 1990s.  It worked back then!  This fund would presumably buy the investments which were hit by the credit crunch over the last few months.  We believe that the worst will be behind us as far as …

A key ingredient to making wise investment decisions is often totally overlooked-What kind of board of directors does a particular company have and can they be dependened on to absolutely look after the shareholders best interest?

Boards and board members have gone through significant changes since the Enron days and the intense focus on corporate governance addressed through legislation and regulation.  At first many enlightened people believed that Sarbanes Oxley and the SEC and stock exchange rules were over kill and too big a burden placed one the many, many good companies as a result of the bad behavior by a few.  And there is some legitimate credibility to that thinking.  But if you look at how new governance scrutiny and guidelines have changed the focus and engagement in the board room, as well as the actual make up of the membership there is a lot to be said about the …

In the wake of a tumultuous year for banks and bank stocks, rumblings of some positive trends for bank earnings are beginning to surface.  I’m hearing from a few regional banks that this summer’s global repricing of credit has already proved beneficial, as new loan volume in August carried wider spreads for the first time in a long time.

One month does not a trend make, but the increase is good news for regional banks dependent on spread income (and which ones aren’t?) My anecdotal information comes from banks and thrifts between $3 and $10 billion, in the mid-Atlantic region, institutions heavily reliant on commercial real estate lending with limited exposure to exotic mortgage risk; traditional 30 and 15 year fixed rate mortgages, but none of the products we’re already tired of hearing about.

How have the global problems trickled down to smaller regional banks so quickly and …