Investors scrambled to avoid bank stocks, especially smaller regional lenders, amid the turmoil in the banking sector over the past week, but the market has bought as much as it sells, a sign some investors see an opportunity amid the recent turmoil.
Citadel, helmed by hedge fund tycoon Ken Griffin, took advantage of the 37% drop in Western Alliance Bancorp (WAL-US) in the past week, buying heavily to hold a 5.3% stake.
Citadel isn’t alone in its optimism about buying bank stocks. Abbott Cooper, a longtime investor in small and regional banks and founder of Driver Management, said in an interview that some of the microbanks in his portfolio had only been able to absorb the drama of the past week, including the collapse of Silicon Valley Bank. , First Republic Bank for help, etc.) as a “disappointment” in their business, and some banks even saw inflows of deposits.
Cooper favors Oklahoma-based BancFirst (BANF-US), in part because only 38% of deposits at the bank are uninsured, while 30% is owned by the Rainbolt family, which still runs the bank. The stock trades at 2.2 times book value, slightly more expensive than its peers, but BancFirst’s valuation is down from recent highs.
Cooper is also optimistic that the recent market turmoil could present an opportunity for banks to clean up their balance sheets. Falling bond prices as the Federal Reserve (Fed) raised interest rates meant many banks were saddled with large unrealized losses, but a recent influx of money into safe-haven assets and expectations that the Fed will change course have pushed bond yields lower and pushed them higher. price.
“My guess is that a lot of banks are using this moment to restructure their bond portfolios,” Cooper said.
