The liquidation of regional banks is overdone, with four names looking particularly attractive at these levels, according to UBS. While bank stocks rose on Thursday, volatility increased this week. The banking sector began to nose dive shortly before the collapse of Silicon Valley Bank (SVB) and continued this week, although regulators said on Sunday they would back SVB depositors. Regional banks have been particularly hard hit. Big banks were also not immune to the selloff, especially after concerns arose over the health of European banks and the financial condition of Credit Suisse. For example, JPMorgan Chase fell nearly 5% and Goldman Sachs fell nearly 10% on Wednesday, before rebounding on Thursday. Regional banks were also up on Thursday following reports that a group of financial institutions were in talks to deposit about $20 billion in First Republic, the San Francisco-based lender that led the decline. According to Raymond James, First Republic had the third highest rate of uninsured deposits, behind SVB and Signature Bank, which also closed last weekend. Erika Najarian, an analyst at KRE 5D mountain SPDR S&P Regional Banking ETF UBS, believes fears about super-regional bank deposits are overblown, noting that these are large-cap stocks, not stocks. community lenders. Investors should also remember that not all regional banks are created equal, she added. “We don’t think this group gets credit for having sticky corporate operational deposits (and those will be over $250,000/account) through cash management services, a very difficult business to win as difficult to operationally implement (and undo),” Najarian wrote in a note Thursday. While regulators are likely to tighten regulatory capital standards, regional banks have time to tackle them internally, particularly if market concerns induced by liquidity shortages ease, she added. . In addition, losses from rising interest rates could diminish or potentially reverse if those rates continue to be under downward pressure, she said. “As such, we believe investors should not view unrealized securities losses statically,” Najarian wrote. Here are four stocks she says stand out from the crowd. The stock losses of Truist Financial and KeyCorp over the past few days suggest a compelling entry point, Najarian said. KeyCorp fell about 25% between Friday’s close and Wednesday’s close. Truist, which hit a 52-week low on Thursday, is down more than 17% over the same period. Meanwhile, Fifth Third Bancorp lost around 16% during this period. Still, the Cincinnati-based bank recently underwent a transformation that led to a 700 basis point improvement in its natural return on tangible average equity (ROTCE), excluding special gains and losses, Najarian pointed out. ROTCE is a metric used by banks to assess overall performance and the performance of individual business units. “Its transition to a high quality region appears to be entirely out of stock at current levels,” she wrote. Fifth Third Bancorp’s CEO and CFO are equally 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 the best among his peers, Najaorian said. Finally, Huntington Bancshares was particularly hard hit relative to its fundamentals, she said. The bank has a “sticky retail deposit base that is 63% of the total, and an underestimated operational corporate deposit base,” she said. Huntington was down nearly 19% from Friday’s close to Wednesday’s.
Four regional banking stocks for the bravest, according to UBS