Bank Stocks Emerge From Silicon Valley Bank Collapse Shadow

The KBW Bank Index’s yearly rout reached a nadir of 29%, with the sector staying lower amid concerns over deposit competition, regulatory proposals and potential credit losses if the economy falters.

Among the investors intrigued by the cheap valuations of regional banks was Bill Smead, the chief investment officer at Smead Capital Management. His firm snapped up shares of Fifth Third Bancorp, M&T Bank Corp. and Western Alliance Bancorp last month, he said.

That’s on top of stakes the value-focused firm already held in JPMorgan Chase & Co. and Bank of America Corp.

Analysts appear divided on where the stocks are headed. For the two-dozen stocks in the KBW Bank Index, the aggregated 12-month price targets now imply a slightly negative return potential, according to data compiled by Bloomberg.

Morgan Stanley kept an in-line rating on the sector into 2024 while shifting to a positive bias, calling the stocks cheap but noting the uncertainty around credit.

Wells Fargo analyst Mike Mayo said that the outlook for 2024 “involves a wider range of outcomes than in the typical year” and that it’s important to prepare for a myriad of scenarios.

Truist analyst Brandon King sees “room to run higher” for regional and community bank stocks next year.

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