If you take a look at the headlines for much of the past week, it might seem like no one wants to be invested in banks, let alone smaller regional banks.
But every market is made up of buyers and sellers – and in the recent tumult some investors have spotted opportunities. Ken Griffin’s Citadel, for example, amassed a 5.3% stake in Western Alliance Bancorp (ticker: WAL), whose stock fell 37% last week.
Citadel…
If you take a look at the headlines for much of the past week, it might seem like no one wants to be invested in banks, let alone smaller regional banks.
But every market is made up of buyers and sellers – and in the recent tumult some investors have spotted opportunities. Ken Griffin’s Citadel, for example, amassed a 5.3% stake in Western Alliance Bancorp (ticker: WAL), whose stock fell 37% last week.
Citadel isn’t alone in being optimistic about buying banks. Abbott Cooper, founder of Driver Management, a longtime investor in smaller regional banks, said barrons that some of the microcap banks in its portfolio view last week’s drama, which included the collapse of Silicon Valley Bank and the bailout of the First Republic (FRC), as a “non-event” for their businesses. Some of these banks even recorded inflows of deposits.
Cooper, for example, likes Oklahoma-based BancFirst (BANF) partly because only 38% of its deposits are uninsured and 30% of the stock is owned by the Rainbolt family, which still runs the bank. Trading at 2.2x book value, the stock looks a bit more expensive than its peers, but BancFirst’s valuation is down slightly from recent highs.
Cooper is also optimistic that the recent market turmoil could give banks a chance to get their balance sheets in order. The decline in the value of Treasuries due to Federal Reserve rate hikes means that many banks are sitting on heavy unrealized losses. But the recent flight to safety and anticipation of a Fed change of course have pushed yields lower and prices higher.
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“I guess a lot of banks are taking this opportunity to remix their bond portfolios,” he says.
Write to Carleton English at carleton.english@dowjones.com