5/7/2023 0 Comments Fidu not in jstock![]() ![]() Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. Since trades have not actually been executed, results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. Backtested performance is developed with the benefit of hindsight and has inherent limitations. This information is provided for illustrative purposes only. No representations and warranties are made as to the reasonableness of the assumptions. Certain assumptions have been made for modeling purposes and are unlikely to be realized. Changes in these assumptions may have a material impact on the backtested returns presented. General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Backtested results are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Backtested performance is not an indicator of future actual results. With this, going contrarian on FRC stock is today, without doubt, an unwise wager.Disclaimer: The TipRanks Smart Score performance is based on backtested results. ![]() Barring a return to a low interest rate environment, the bank may have to contend with slim net interest margins.Īny way you slice it, there’s far more pointing to additional declines, than even a partial recovery. When you factor in unrealized loan losses, FRC could trade at fair value or at a steep premium to the current market value of its loan portfolio.Įven in the event First Republic can secure the capital needed to hold onto its underwater loans to maturity, it could still be a long slog back to profitability. The VerdictĪlthough First Republic may look oversold on the surface, a closer look signals otherwise. ![]() The resultant dilution would place additional pressure on the stock. Otherwise, to shore up its liquidity, FRC may need to raise additional equity, either by converting some of these recent deposits into capital, or from receiving a separate capital infusion. There’s a strong chance of this happening, given that the aforementioned big bank deposits are short-term in nature. The bank may have to realize even larger losses, if it needs to sell some of these loans in the near-term. That figure exceeds FRC’s tangible book value at the end of 2021 ($13.4 billion).Įven if unrealized losses are less than that, First Republic’s underlying value could continue to drop.įor example, as Reuters also reported, a majority of First Republic’s loan book comprises jumbo single-family mortgages. According to Reuters, analysts estimate losses could be as much as $13.5 billion. However, I wouldn’t quickly jump to that conclusion. The question is how much less? Some may believe that FRC’s price decline has accounted for unrealized loan losses, and then some. It’s clear that the “true book value” for FRC stock is far less than the figure reported as of Dec. In fact, between loan losses, along with the fact that its “rescue deposits” and increased Federal Reserve borrowing will squeeze its net interest margin, FRC is likely to report negative earnings for 2023. ![]()
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