Collectively, the nine publicly-traded Mississippi-based banks have a market capitalization of $5.2 billion. They employ more than 10,000 people. And in the last quarter of 2004, they reported $1.46 million in revenues.
“The banking industry looks real solid, largely because interest rates are staying relatively low and consumers are still borrowing,” said Pinnacle Trust CEO Stacey Wall of Ridgeland. “Business borrowing is slow, but I think it’ll pick up in the next year as entrepreneurs and bankers gain more confidence with the status of the economy. The housing market is still real strong, so the mortgage business is still strong, which is good for banks.”
Jackson-based Trustmark (NASDAQ: TRMK) nudged BancorpSouth (NYSE: BXS) of Tupelo with the highest market capitalization, as of March 16. Trustmark reported $1.639 billion, and BancorpSouth reported $1.633 billion. Hancock Holding (NASDAQ: HBHC) of Gulfport was third, with a market capitalization of $1.047 billion. The remaining six banks reported a combined market capitalization of $880 million. However, BancorpSouth brought in more money than other Mississippi banks during the last four quarters, $517 million in revenues compared to Trustmark’s $406 million and Hancock Bank’s $260 million.
“Banks have been fortunate because interest rates have risen gradually and so far, the economy’s been able to stomach the increase without problems,” said Wall. “We haven’t had a sharp spike in rates, and that’s really what tends to scare off businesses and consumers.”
George H. Borg, CFA, a principal with Smith Shellnut Wilson in Ridgeland, said at press time that it was widely anticipated the Federal Open Market Committee (FOMC) would raise the Fed Funds Target from 2.50% to 2.75% at its March 22 meeting. It would mark the seventh time that the Fed Funds Target has been raised 25 basis points since June 30, 2004.
“The Federal Reserve is trying to slow the economy to prevent inflation,” he said. “The only interest rate the Fed can control is the Fed Funds Rate, the overnight rate that banks use to borrow and invest with each other. All other interest rates along the yield curve are affected by the overnight rate, but set by market activity.”
Inflation has not been a problem for a while, said Borg, because “The Fed, under the leadership of Chairman Greenspan, has done an excellent job at managing monetary policy” and because of the “productivity of U.S. workers.”
Ashby Foote III, president of Vector Money Management in Jackson, said banks do very well performance-wise during periods of falling interest rates and tend to under perform during periods of rising rates, “so Mississippi banks may have to face a little headwind here if rates continue to go up over the next year or so.”
“They’ve had a great run the past 20 years, benefiting from falling interest rates and falling inflation and industry consolidation that continues to take place,” he said. “These smaller banks really haven’t been involved in the industry consolidation, but obviously some have been consolidated out, such as Deposit Guaranty Bank (initially First American Bank, now part of AmSouth) and Sunburst (now part of Regions-Union Planters). So people have made money in the past 20 years for both reasons.”
Banks along the Mississippi Gulf Coast, such as Hancock Holding, are poised to benefit from an economic boost in the next six to 12 months from an unlikely source, said Foote.
“Insurance payouts from all the hurricane damage along the Coast, particularly with Hurricane Ivan, could end up being a real boon for the economy in the banking industry because these huge deposits of insurance money will be coming in,” he said. “I was at a local bank conference and heard Hancock’s presentation and they made the point about having exposure in the Florida Panhandle through acquisition, an area that was hit unbelievably hard. They talked about (a past hurricane) that hit along the coast and six months later, they had more assets than ever before because of all the insurance money that came in. It brought a lot of economic activity to the Gulf Coast. So they may have a little extra wind in their sails that comes from the rebuilding of the Gulf Coast, at least the Florida panhandle side.”
Contact MBJ contributing writer Lynne W. Jeter at firstname.lastname@example.org.