The news about banks has been bad. Some investors see the opportunity.
If you looked at the headlines for much of the past week, it might seem like nobody wanted to be invested in banks, at least smaller, regional ones.
But every market is made up of buyers and sellers – and in the latest tumult, some investors spotted opportunity. Ken Griffin’s Citadel, for example, amassed a 5.3% stake in Western Alliance Bancorp (ticker: WAL ), whose shares fell 37% in the past week.
Citadel…
If you looked at the headlines for much of the past week, it might seem like nobody wanted to be invested in banks, at least smaller, regional ones.
But every market is made up of buyers and sellers ̵[ads1]1; and in the latest tumult, some investors spotted opportunity. Ken Griffin’s Citadel, for example, amassed a 5.3% stake in Western Alliance Bancorp (ticker: WAL ), whose shares fell 37% in the past week.
Citadel is not alone in feeling optimistic about buying banks. Abbott Cooper, founder of Driver Management, a longtime investor in small and regional banks, said Barron’s that some of the micro-cap banks in his portfolio view the drama of the past week, which included the collapse of Silicon Valley Bank and the bailout of First Republic (FRC), as a “non-event” for their businesses. Some of these banks have even seen deposits.
Cooper, for example, likes Oklahoma-based BancFirst (BANF), in part because only 38% of its deposits are uninsured and 30% of its shares are owned by the Rainbolt family, which still runs the bank. The stock, which trades at 2.2 times book value, looks a little more expensive than competitors, but BancFirst’s decline is down a bit from recent peaks.
Cooper is also optimistic that the latest market upheaval may give the banks a chance to get their balance sheets in order. The falling value of government bonds due to interest rate hikes by the Federal Reserve means that many banks are sitting on large unrealized losses. But the recent flight to safety and expectations that the Fed will change course has pushed yields down and prices up.
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“My guess is that a lot of banks are taking advantage of this to remix their bond portfolios,” he says.
Write to Carleton English at carleton.english@dowjones.com
