Colonial BancGroup, Inc. (CNB)

Your data on CNB is only part of the story. CNB is headed for sell or doom. But first, some facts:





1) CNB has a significant presence in Florida and Alabama. The other 3 states have relatively little overall impacty on the company.


2) CNB is a commercial bank. True they did not participate in subprime mortgage lending or speculating, however they are a commercial bank. This type of bank lends on commercial projects as, far and away, their primary source of revenue. Their retail franchise is only a side-effect of the commercial lending area.


3) Commercial lending trends follow residential lending trends. Therefore, once we hit the bottom of the residential lending crisis, we will have several months until we hit the bottom of the commercial lending crisis.


4) The CEO is the largest shareholder in the company. OF COURSE he bought stock at the recent re-issue, he is trying to show wall street and other investors he 'believes' in his company. In reality the 65 year old Lowder is trying to rebuild his own wealth.


5) The executive team is a group of sub-par Montomery, AL based bankers with little knowledge of the real world. (Just look at the website of this company. Can you say 1990..) They continue to try and outsmart everyone with the 'no-subprime' line, but you have to see past that as just a smoke screen. Sub-prime will not bring them down, bad commercial loans in FL and NV will. Especially commercial loans to build condo's.


6) The company has sold one significant piece of its business each year for the last several to mitigate losses and 'continue it's track record of growth'. But is it really growth when you have to sell a part of your company to meet estimates? Does this say something about it's strategic planning abilities?





It is very clear that the CEO believes he will live forever. He is 65 and has no succession plan and NONE of his executive team is qualified to run the company. In his mico-manage style, all loans north of $2 million need his blessing!!! For a $25 Billion bank!?! Maybe he should invest some time in the people around him and technology before looking to pad his own wallet.





I predict 2 outcomes:





1) The company will be sold, upon the CEO's death or otherwise. The JPMorgan's or US Bank's of the world would be a nice business line and geographical fit.





2) As commercial credit tightens (and consumer credit at CNB) commercial clients will use their cash to pay for the loans they have outstanding, since they can't sell their product and banks will not let them refinance the debt. Consumers will move their deposits to a bank with a brand name and some stability. Bye-Bye liquidity and capital. The bank will be forced to sell as they will be unable to make money from their bread an butter, commercial lending. I expect the fed to step in and halt lending in this case.





Remember, even a stock trading at book value of assets, or below, is still predicated on the quality of the assets. In this case the bulk assets are; commercial loans and real estate in FL.





I wouldn't touch this stock with your 10 foot pole.