Regional bank bosses grab ‘bargain’ stocks from SVB turmoil

REGIONAL bank leaders are snapping up shares of their companies’ stocks, taking advantage of a sell-off fuelled by the fallout from Silicon Valley Bank’s (SVB) collapse.

More than 100 executives at lenders across the US, including PacWest Bancorp, Metropolitan Bank Holding and CVB Financial, spent at least US$13.9 million combined boosting their stakes, according to data compiled by Bloomberg. Most of the transactions took place in the past few days.

Pershing Square Capital Management’s Bill Ackman on Monday (Mar 13) described the stocks as an “incredible bargain”, with the KBW Regional Banking Index slumping 20 per cent for the month through yesterday’s close.

Many of the trades are already turning a profit as regional bank stocks rallied on Tuesday to erase part of the earlier rout.

That includes the US$1 million investment for Phillip D Green, chief executive officer (CEO) of Cullen/Frost Bankers, who made one the biggest disclosed bets. Green bought 9,500 shares of the Texas-based company for about US$106.60, according to a regulatory filing. The stock closed Tuesday at US$111.52, up about 4.6 per cent from that price.

Green’s purchases were to show confidence in the firm and as a “sign of support”, said Bill Day, a spokesperson for Cullen/Frost.

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East West Bancorp (EWBC) chief financial officer Irene Oh bought nearly US$500,000 worth of stock on Monday, according to a filing. The Pasadena, California-based lender released a statement earlier that day reiterating its capital and balance sheet strength.

“Irene Oh’s purchase is a strong signal about the strength of EWBC and the quality of our franchise,” Julianna Balicka, the firm’s director of investor relations and corporate finance, said in an email. “The sell-off in bank stocks created a compelling entry point to buy.”

Tuesday’s surge

Jay Sidhu, chairman of Customers Bancorp, picked up about US$500,000 of the crypto-friendly bank’s stock on Monday, while president Sam Sidhu bought more than US$100,000 worth on Tuesday, according to a filing.

“Clearly, we have strong conviction in the organisation,” Sam Sidhu said by phone.

Metropolitan Bank Holding CEO Mark DeFazio also added shares, buying about US$500,000 worth through indirect ownership. Multiple members of the New York-based lender’s board also made purchases.

“I view these transactions as opportunistic following yesterday’s significant sell-off and these purchases also express a vote of confidence in their firms,” Wedbush analyst David Chiaverini said in an email.

Monday’s filings also showed PacWest CEO Paul Taylor bought about US$500,000 worth of shares on Thursday at an average price of US$22.20 per share. After plunging Friday and Monday, the stock gained 34 per cent to close at US$13.05 on Tuesday.

“It’s pretty rare to see that many insiders step in,” Bruce Cox, founder of the Harrington Alpha Fund, said by phone. His firm took a long position in PacWest last week amid the sell-off, and added to it on Monday.

The relative strength index for the KBW Bank Index and its regional counterpart flashed their most oversold signal in two decades on Monday.

“Regional bank shares are climbing higher as if there’s an ‘all clear’ signal,” LPL Financial chief global strategist Quincy Krosby said. “Questions remain whether there are risks still embedded on balance sheets, particularly if depositors continue to demand funds.” BLOOMBERG