Selling in regional banks is overdone, with four names looking particularly attractive at these levels, according to UBS. And while bank stocks rose on Thursday, volatility was higher this week. The banking sector’s decline began shortly before the collapse of Silicon Valley Bank (SVB) and has continued this week, although regulators said on Sunday that they would support depositors with SVB. Regional banks have been particularly hard hit. The big banks were not immune from the sell-off either, especially after concerns arose about the health of European banks and the financial condition of Credit Suisse. JPMorgan Chase, for example, sank about 5% and Goldman Sachs fell nearly 10% on Wednesday, before bouncing back on Thursday. Regional banks also rose Thursday on reports that a group of financial institutions is 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, ETF analyst at UBS KRE 5D Mountain SPDR S&P, believes concerns about deposit inflows into major regional banks are exaggerated, noting that they are large-cap stocks, not community lenders. She added that investors also need to remember that not all regional banks are created equal. “We do not believe this group is getting credit for having corporate sticky operational deposits (and these would be greater than $250,000 per account) through treasury management services, a business that is very hard to win because it is challenging to operationally implement (and roll back),” Najarian wrote. On a note on Thursday. She added that while regulators are likely to tighten regulatory capital standards, regional banks have time to address them internally, especially if market concerns stemming from liquidity pressure subside. She added that the losses resulting from the rise in interest rates may be reduced or reversed if these rates continue under downward pressure. “Thus, we believe that investors should not view unrealized securities losses in a fixed manner,” Najarian wrote. Here are four stocks that you think stand out in the crowd. Najarian said the share losses of Truist Financial and KeyCorp over the past several days indicate a compelling entry point. KeyCorp stock fell about 25% between the close on Friday and Wednesday. Truist, which hit a 52-week low Thursday, has lost more than 17% over the same period. Fifth Third Bancorp, meanwhile, has fallen about 16% over that period. Najarian noted that the Cincinnati-based bank recently underwent a transition that resulted in a 700 basis point improvement in its normal return over average tangible common equity (ROTCE), excluding special gains and losses. ROTCE is a measurement used by banks to assess overall performance and how individual business units are doing. “Its move into a higher-end regional appears to be completely out-of-stock at current levels,” she wrote. Third Bancorp’s CEO and CFO are also impressive, she added. Chief Executive Officer Timothy Spence is often credited with accelerating the bank’s digital transformation, and Chief Financial Officer Jamie Leonard’s balance sheet risk management is often recognized as the best among peers. Finally, Huntington-Bankshire has been hit particularly hard relative to its fundamentals, it said. She added that the bank has “a fixed retail deposit base that constitutes 63% of the total, and an undervalued corporate operating deposit base.” Huntington lost nearly 19% between Friday and Wednesday’s close.
Four regional bank stocks for the brave to buy, according to UBS
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