Bank stocks have seen little new private equity activity over the last 12 months.
SNL identified 23 major-exchange-traded U.S. bank and thrift stocks where a PE firm owned at least 10% of the listed common shares outstanding, as of May 2. That is down slightly from the 26 that SNL had identified as of June 8, 2012.
What's changed? The private equity investors in BankUnited Inc. and First Republic Bank, which both held IPOs in 2011 and 2010, respectively, have since reduced their stakes to below 10%, while Ford Financial Fund LP sold its investment in Pacific Capital Bancorp in 2012. Lastly, Warburg Pincus LLC cut its listed stake in Webster Financial Corp. below 10%, and has announced plans to fully exit the investment by May 13.
One new investment above 10% in a major-exchange-traded bank stock has closed in the last year, according to SNL's research: Hovde Capital Advisors LLC acquired a 74.87% stake in Carrollton Bancorp.
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Lukewarm payoff for many investors
The common stock associated with the PE investments outstanding has also continued to underperform in more than half of the cases analyzed by SNL. If an investor had followed the PE firms' leads and bought the common stock of the banks at the same time as the PE investment was made, the investors' total returns would have been less than the total returns of the SNL Bank & Thrift Index over the same time periods in 14 of the 23 investments, based on May 2 closing prices.
(The date of Siguler Guff Advisers LLC's investment in Stamford, Conn.-based Patriot National Bancorp Inc. is not publicly available, so SNL could not calculate the common stock's return during this period.)
California story more upbeat
Among the investments that would have done well for common stock investors are the five California banks owned by PE firms.
All have returned positively between the date of the PE firm's investment and May 2, and three of the five posted returns that beat the SNL Bank & Thrift Index over the same period: San Jose, Calif.-based Bridge Capital Holdings; Fresno, Calif.-based Central Valley Community Bancorp; and Paso Robles, Calif.-based Heritage Oaks Bancorp.
Sector hasn't frozen completely
U.S. private equity firms have not completely lost interest in the banking space. There are several U.S. PE firms reportedly vying for a portfolio of Royal Bank of Scotland Group Plc branches in the United Kingdom. The Financial Times reported May 1 that WL Ross & Co. LLC, Corsair Capital LLC, and Centerbridge Partners LP are among the interested bidders.
Castle Creek Capital LLC has also been particularly active in the space over the past year, although it does not currently hold an investment in the primary traded common stock of a major-exchange-listed bank that is over 10%.
Note that in this analysis, SNL has not calculated the PE firms' return on their investments. The return of the banks' common stock may have little correlation with the PE firms' ROI, since PE firms often buy ownership at a discount to open market prices or they buy preferred shares, convertible shares, warrants, rights, or other types of securities.
Rather, SNL is calculating the performance of the common stock on the open market while the PE firms owned parts of the companies.
By Andy Pierce and Maria Tor, SNL Financial staff writers
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