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CFRA reckons the recent selloff in regional bank stocks, following the collapse of three lenders earlier this month, is prompting a buying opportunity in six beaten-down stocks within the sector.
Regional banks that maintain robust deposit balances and provide services to healthy customers are expected to see their stocks fare well in the future, analyst Alexander Yokum contended in a note to clients, shouting out East West Bancorp (NASDAQ:EWBC), Citizens Financial Group (NYSE:CFG) and Synovus Financial (NYSE:SNV) as potential winners.
Those with high percentages of insured deposits, meantime, are also poised to fare well, he added, while referencing Regions Financial (NYSE:RF), Webster Financial (NYSE:WBS) and Fifth Third Bank (NASDAQ:FITB). “The customers of these banks are usually less worried about bank solvency,” and “smaller account balances are less susceptible to interest rate moves.
Banking sentiment has taken a severe hit since Silicon Valley Bank (OTC:SIVBQ) failed on March 10 after a bank run, with the SPDR S&P Regional Banking ETF (KRE) dropping 28.7% M/M vs. the S&P 500’s slight 0.03% gain. In recent days, though, market participants turned their attention away from the banking sector as the worst of the turmoil appears likely in the rearview mirror.
One of the main reasons why SVB (OTC:SIVBQ) was more at risk than peers was due to its insured deposit base of only 4.5%, Yokum pointed out. To stem further damage in the banking system, regulators took emergency action to guarantee both insured and uninsured depositors of SVB and Signature Bank.