The U.S. Banks and Thrifts portfolio is comprised of previously converted thrifts as well as deposit accounts in mutual banks, which give Polaris valuable preferential rights to purchase stock if the mutual institution converts to stock ownership. The bank stocks in the portfolio, typically smaller thrifts and community banks, are broadly diversified geographically. Many of the portfolio holdings have footholds in multiple markets and neighboring states.
While our global portfolios typically incorporate select U.S. banks, the Thrifts portfolio is a dedicated investment strategy focused solely on the financial sector (U.S. banks and U.S. thrift banks). Accredited and qualified investors interested in this portfolio should contact us directly for a more in-depth strategy discussion, whereby an outline of process, philosophy, holdings and performance can be adequately addressed.
In the meantime, we provide a brief glimpse into our current investment thesis and outlook for the portfolio, cognizant of ever changing macroeconomic conditions (geopolitical risks, interest rates/Fed Funds rates, capital requirements, etc.). Check back regularly to see our outlook for each coming quarter.
With higher-for-longer rates and a steeper yield curve, we continue to favor banks that keep deposit costs low while lending at higher rates, a combination that should support margins. Banks in markets with limited competition for deposits are the clearest example — as evidenced from our quarterly results.
Our base case is that higher rates temper growth without causing a recession. What bears watching is whether the rate cycle turns into a credit cycle over the next couple of years. When growth cools, competition for good loans intensifies and some lenders loosen their standards to win business. We are examining how new loans are being made and whether managements are chasing yield or staying disciplined. We favor teams that successfully navigated the 2023 banking industry turmoil and CRE downturn, as such experience usually makes lenders more diligent.
Periods of slower growth tend to bring consolidation, and today is no exception. Banks with higher deposit costs, whether larger institutions or fellow community banks, are increasingly looking to acquire low-cost deposit franchises to fund future loan growth at higher rates. That may bode well for many of our portfolio companies. For more on our views about banking M&A, see Sam Horn’s recent article in The Financial Brand.
Recent views on the U.S. banking sector:
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Bullish On U.S. Bank Stocks: January 2025
Can U.S. Bank Stocks Recover From The 2023 Crisis: December 2023
Interested in learning more about Polaris’ U.S. bank and thrifts portfolio? Contact us today.
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IMPORTANT INFO: RETIREMENT CALCULATOR
The retirement calculator is a model or tool intended for informational and educational purposes only, and does not constitute professional, financial or investment advice. This model may be helpful in formulating your future plans, but does not constitute a complete financial plan. We strongly recommend that you seek the advice of a financial services professional who has a fiduciary relationship with you before making any type of investment or significant financial decision. We, at Polaris Capital, do not serve in this role for you. We also encourage you to review your investment strategy periodically as your financial circumstances change.
This model is provided as a rough approximation of future financial performance that you may encounter in reaching your retirement goals. The results presented by this model are hypothetical and may not reflect the actual growth of your own investments. Polaris strives to keep its information and tools accurate and up-to-date.
The information presented is based on objective analysis, but may not be the same that you find at a particular financial institution, service provider or specific product’s site. Polaris Capital and its employees are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this tool. Polaris is not responsible for any human or mechanical errors or omissions. All content, calculations, estimates, and forecasts are presented without express or implied warranties, including, but not limited to, any implied warranties of merchantability and fitness for a particular purpose or otherwise.
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DISCLAIMER: You are about to leave the Polaris Capital Management, LLC website and will be taken to the PCM Global Funds ICAV website. By accepting, you are consenting to being directed to the PCM Global Funds ICAV website for non-U.S. investors only.