Three main risks for Banner Corporation (NASDAQ: BANR) to know

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The banking sector has experienced growth resulting from the improvement in credit quality resulting from the post-GFC recovery. As a small-cap bank with a market capitalization of $ 2.0 billion, the earnings and value of Banner Corporation (NASDAQ: BANR) are directly affected by economic growth. Indeed, borrowers' demand and repayment capacity depend on the stability of their wages and interest rates. Repayment risk is measured by the bad debt that is written off as an expense, which impacts Banner's net results. Today, I will present some measures of bad debts and liability to analyze the level of risk assets held by the bank. Examining risk is a useful way to assess the attractiveness of Banner's equity investment.

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NasdaqGS: Historical Debt of the BANR, March 15, 2019

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Does Banner have its own risks?

Banner's ability to accurately forecast and fund bad debts shows that it fully understands the level of risk it is taking. If the bank provided more than 100% of bad debts that it wrote off, then it could be considered relatively cautious and precise in its provisioning. Given its large nonperforming NPL ratio of more than 500%, Banner has over-provisioned compared to the current level of NPLs, which could indicate that the bank expects to take out new loans. doubtful in the short term. future.

How much risk is too much?

Banner's activities expose it to risky assets by lending to borrowers who may not be able to repay their loans. Loan totals should generally be less than 3% of loans considered irrecoverable, also known as bad loans. Bad debts are written off when loans are not repaid. This is classified as an expense that has a direct impact on Banner's net income. Given that bad debts represent only 0.18% of its total assets, the bank can have very strict risk management – or perhaps the risks of its portfolio have not yet materialized.

Is there enough security to borrow?

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Banner operates by lending its various forms of loans. Client deposits tend to have the least risk given the relatively stable interest rate and available amount. In general, the more a bank holds high deposits, the less risky it is. Banner's total deposit level, which represents 91% of total liabilities, is very high and well above the reasonable threshold of 50% for financial institutions. This can mean that the bank is too cautious with the level of its loan form more secure and has plenty of leeway to assume more risky forms of liability.

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Next steps:

What impact will the recent acquisition of BANR have on future activity? Should you be concerned about BANR's future and the sustainability of its financial health? I've added the BANR corporate page in Simply Wall St to my favorites, to stay informed of the changing outlook and valuation. This is also the data source for this article. The three main sections I recommend you consult are:

  1. Future prospects: What do well-informed industry analysts predict for BANR's future growth? Check out our free research report on analyst consensus regarding the outlook for the BANR.
  2. Evaluation: What is BANR worth today? Has the potential for future growth already been factored into the price? The intrinsic value infographic of our free research report allows us to visualize whether the BANR is currently poorly evaluated by the market.
  3. Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.

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"data-reactid =" 68 "> Our goal is to provide you with a long-term research analysis based on fundamental data.Please note that our analysis may not take into account the latest announcements of price sensitive companies or qualitative material.

If you notice an error that needs to be corrected, please contact the publisher at editorial-team@simplywallst.com. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.