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Dream time
Looking at the headlines for much of the past week, it might seem like no one wants to invest in banks, let alone smaller, regional banks.
But every market is made up of buyers and sellers – and in the recent turmoil, some investors saw opportunity. Ken Griffin’s Citadel, for example, amassed a 5.3% stake
Bancorp of the Western Alliance
(ticker: WAL), whose stock fell 37% last week.
Citadel isn’t alone in being optimistic about buying banks. Abbott Cooper, founder of Driver Management, a longtime investor in small and regional banks, said from Baron that some of the microcap banks in his portfolio look at the drama of the past week, including the collapse of Silicon Valley Bank and the bailout of
First Republic
(FRC), as a “none event” for their companies. Some of these banks have even experienced deposit inflows.
For example, Cooper loves Oklahoma
BankFirst
(BANF), in part because only 38% of deposits are uninsured and 30% of shares are owned by the Rainbolt family, which still runs the bank. The stock trades at 2.2 times book value and looks a bit more expensive than peers, but BancFirst’s valuation is down slightly from recent highs.
Cooper is also optimistic that the recent market turmoil could give banks a chance to get their balance sheets in order. The falling value of government bonds as a result of interest rate hikes by the Federal Reserve means that many banks are left with large unrealized losses. But the recent flight to safety and the expectation that the Fed will change course has led to lower yields and higher prices.
“I suspect many banks are taking advantage of this to remix their bond portfolios,” he says.
Write to Carleton English at carleton.english@dowjones.com