The cash king
UMB Financial Corporation (NASDAQ:UMBF) has a cash to total asset ratio of 57%, the highest in the US financial industry. Headquartered in Missouri and with banking centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona, UMB is a small bank with a lot to gain from higher interest rates. The bank is poised to increase its return-on-assets from its current 0.79% to well over 1% as rates continue their upward trend.
UMB Financial Corporation (NASDAQ:UMBF), which is up by 36% year-to-date, trades at 190% its book value and 19 times its price-to-earnings ratio. Even if the bank looks a bit expensive relative to bigger banks such as Citigroup Inc (NYSE:C) (which trades at 80% of its book value), it is really not that expensive when we take into account UMB Financial Corporation (NASDAQ:UMBF)’s high 8.7% return on equity and its huge potential give the size of its cash pile.
Growing at Silicon Valley rates
SVB Financial Group (NASDAQ:SIVB) is the second bank on my cash to total assets ratio list. The bank has 55% of its total assets invested into short term cash equivalent securities. Serving the California area, this small financial institution has been the performance king. The bank has been adding deposits at a 15.5% year-over-year rate and increasing loans at a 24.2% year-over-year rate. As a result, net interest income is growing at a yoy rate of 8.1%.
Even when Mr. Market has recognized the bank’s growth (the stock is up by 61% year-to-date), I think there is still more space for continued out-performance. SVB Financial Group (NASDAQ:SIVB) trades at 23 times its price-to-earnings ratio and 152% its book value, but the current interest rate trends are going to contribute immensely to ameliorate the bank’s 7% return on equity and 0.82% return on assets.