The sell-off in regional banks is overdone, with four names looking especially attractive at these levels, according to UBS. While bank stocks moved higher on Thursday, volatility has risen this week. The banking sector began to nosedive shortly before the collapse of Silicon Valley Bank and continued this week, despite regulators saying Sunday that they would backstop SVB’s depositors. Regional banks were particularly hard hit. Large banks weren’t immune to the sell-off either, especially after concerns rose over the health of European banking and Credit Suisse ‘s financial condition. For instance, JPMorgan Chase sank nearly 5% and Goldman Sachs tumbled nearly 10% on Wednesday before rebounding Thursday. Regional banks were also up Thursday on the news that a group of financial institutions are in talks to deposit $30 billion in First Republic , the San Francisco-based lender that had been leading the decline. According to Raymond James, First Republic had the third-highest rate of uninsured deposits, behind SVB and Signature Bank, which was also shuttered last weekend. KRE 5D mountain SPDR S & P Regional Banking ETF UBS analyst Erika Najarian believes fears over deposit runs in the super-regional banks are overdone, noting that they’re large-cap stocks, not community-based lenders. Investors also need to remember that not all regional banks are equivalent, she added. “We do not think this group is getting credit for having sticky, operational deposits of corporates (and these will be greater than $250k/account) through treasury management services, a business that is highly difficult to win because it is challenging to operationally implement (and undo),” Najarian wrote in a note Thursday. While regulators will likely tighten regulatory capital standards, regional banks have time to address it internally, especially if the liquidity squeeze-induced market concerns subside, she added. Also, losses due to rising interest rates could narrow or potentially reverse if those rates continue to be under downward pressure, she said. “Thus, we believe that investors should not look at unrealized securities losses in a static manner,” Najarian wrote. Here are four stocks she believes stand out in the crowd. Truist Financial and KeyCorp stock losses over the past several days suggest a compelling entry point, Najarian said. KeyCorp fell about 25% between Friday’s and Wednesday’s close. Truist, which hit a 52-week low on Thursday, lost more than 17% over the same span. Meanwhile, Fifth Third Bancorp shed about 16% during that time. Yet the Cincinnati- based bank recently went through a transformation that led to a 700-basis-point improvement in its natural return on average tangible common equity, or ROTCE, excluding special gains and losses, Najarian pointed out. ROTCE is a measurement banks use to assess overall performance and how individual business units are performing. “Its transition to a high quality regional appears to be fully priced out of the stock at current levels,” she wrote. Fifth Third Bancorp’s CEO and chief financial officer are also impressive, she added. CEO Timothy Spence is often credited with accelerating the bank’s digital transformation and CFO Jamie Leonard’s balance sheet risk management is often recognized as best-among-peers, Najaorian said. Lastly, Huntington Bancshares has been especially hard hit relative to its fundamentals, she said. The bank has a “sticky retail deposit base that comprises 63% of total, and an underrated operational corporate deposit base,” she said. Huntington lost nearly 19% between Friday’s and Wednesday’s close.
Sumber: www.cnbc.com
