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CFRA believes that the recent sell-off in regional bank shares, following the collapse of three lenders earlier this month, is creating a buying opportunity in six downturned stocks within the sector.
Regional banks that hold Strong deposit balances and servicing healthy customers are expected to see its shares perform well in the future, analyst Alexander Yokum said in a note to clients, shouting at East West Bancorp (NASDAQ:EWBC), Ciudadanos Financial Group (NYSE: CFG) and Synovus Financial (NYSE:SNV) as potential winners.
Meanwhile, those with high percentages of insured deposits are also poised to do well, he added, referring to Regions Financial (New York Stock Exchange:RF), Webster Financial (NYSE:EDT) and Fifth Third Bank (NASDAQ:FITB). “Customers of these banks tend to be less concerned about bank solvency” and “smaller account balances are less susceptible to interest rate movements.”
Bank confidence has taken a hit since Silicon Valley Bank (OTC:SIVBQ) failed on March 10 following a run on banks, with the SPDR S&P Regional Banking ETF (KRE) falling 28.7% on a monthly basis against the slight gain of 0.03% of the S&P 500. However, in recent days, market participants have turned their attention away from the banking sector as the worst of the turmoil looks likely in the rear view mirror.
One of the main reasons SVB (OTC:SIVBQ) was more risky than its peers was due to its insured deposit base of just 4.5%, Yokum said. To prevent further damage to the banking system, regulators took emergency measures to guarantee both insured and uninsured depositors of SVB and Signature Bank.
