Fitch: Core Competencies Provide Balance to Concentration Risks for US Niche …

(The following statement was released by the rating agency)
NEW YORK, June 20 (Fitch) The outlook for U.S. niche real estate
banks for the
remainder of 2013 is mixed given various idiosyncratic risks
facing individual
banks and the overall market environment, according to a new
Fitch Ratings
report.
Earning headwinds are a risk the entire group, although some of
Fitch’s lower
rated niche banks have some potential ratings upside in the
medium term due to
improving asset quality. Furthermore, regulatory changes should
have a mixed
impact throughout the group, as residential lenders will face
heighted burdens
from new regulations relative to commercially focused lenders.
For the third consecutive year all of the niche banks posted
positive results.
The median ROA for the group is nearing pre-crisis levels.
However, core
earnings for the group are expected to face headwinds in the
near term as
reserve releases slow and banks continue to combat margin
pressures. Niche banks
are especially susceptible to margin pressure since they have
very little fee
income revenue. Fee revenue totals 14% of total revenue versus
27% for mid-tier
regional banks (banks with $10bn-$35bn in assets).
The five issuers in Fitch’s niche real estate bank portfolio
typically employ
focused strategies with limited product offerings and limited
revenue
diversification. Fitch generally views asset concentrations
negatively. This
view is balanced against these institutions’ demonstrated
ability to implement
core strategies with limited volatility through economic cycles.
Fitch also notes that unlike most of the banking industry, many
of the niche
banks are actively pursuing opportunities to expand their branch
network to
reduce reliance on wholesale funding.
On April 10, 2013, Fitch reviewed the ratings for the five banks
in its niche
real estate peer group. Following the review, Fitch upgraded
Emigrant Bancorp,
Inc.’s (EMIG) long-term Issuer Default Rating to ‘B’ from ‘B-‘.
Fitch also
affirmed the remaining four niche bank ratings – Astoria
Financial Corporation,
CapitalSource, Inc., Dime Community Bancshares, Inc., and New
York Community
Bancorp, Inc.
The full report ‘U.S. Banks – Niche Real Estate Lenders’ is
available at
‘www.fitchratings.com’.
Contact:
Jaymin Berg
Director
+1-212-908-0368
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Christopher Wolfe
Managing Director
+1-212-908-0771
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Email:
[email protected]
Additional information is available at ‘www.fitchratings.com’.
Applicable Criteria and Related Research: U.S. Banks – Niche
Real Estate Lenders
(Core Competencies Bring Balance to Concentration Risk)
here
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