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The number of U.S. regional bank insiders buying stock in their own companies reached a three-year high during the second quarter, in what appears to be a vote of confidence in the sector after the recent collapse of a handful of regional lenders, according to the research. VerityData Inc.
The number of insider buyers jumped to 778 in the second quarter through May 26 from 524 during the entire first quarter, Reuters reported recently, citing VerityData research. The scale of this buying frenzy has not been seen since the first quarter of 2020, when the advent of COVID-19 triggered stock market selling. During the second quarter through May 26, 2023, 244 banks saw massive insider buying, including US Bancorp (USB), Zions Bancorp (ZION), SoFi Technologies (SOFI), and East West Bancorp (EWBC).
Note that the SEC requires company executives to disclose all of their trading activities within two business days after the date of the transaction. Investors generally closely watch such activity in the belief that insiders have more information about the company and its prospects.
Since the beginning of the banking crisis, SoFi (SOFI) CEO Anthony Noto has ramped up his stake in the fintech bank through six separate stock purchases, the latest of which was the purchase of 108,000 shares on May 15 for an average purchase price of $4.67 per share. The stock linked to student loans has nearly doubled since then as investors cheered a provision in the US debt-ceiling package spelling out a definitive end to the moratorium on repaying federal student loans.
In another sign of bullishness among bank insiders, the ratio of buyers to sellers hit a record 14.7 to 1 in the second quarter, according to VerityData. Outsidecompared to an average quarterly ratio of 1.8 to 1.
However, regional bank stocks remained bearish, although they have stabilized in recent weeks, due to the failure of the Silicon Valley bank in March, with the SPDR S&P Regional Banking ETF (KRE) down 25.5% Since the beginning of the year, iShares US Regional Banks ETF (IAT) 26.9% off and Invesco KBW Regional Banking ETF (KBWR) -18.8% As of Friday’s close.
In the wake of this weakness, the pressures in the banking sector have not stopped yet. Utilization of the Fed’s Term Financing Program, a new lending facility created in March to ensure banks meet depositors’ needs, reached a new record high of $100.2 billion for the week ending June 7. This is the fifth in a row. week The Fed’s lending to banks through the program has moved to a new high.
On May 19, banking stocks fell after Treasury Secretary Janet Yellen was reported to have brought to the CEOs of the largest US banks the potential need for additional bank mergers, reminding investors that turmoil in the sector is still evident.
To get a contrarian view, Alpha Pacifica Yield analyst looking for a buy recommendation for Western Alliance Bancorporation that has been grappling with banking turmoil, put it on strong deposit growth as well as an expected pause in the Federal Reserve’s hiking rate. Fellow Albert Anthony, SA analyst, rates Comerica (CMA), down 36.8% year-to-date, as a Strong Buy “due to its undervaluing, strong equity ratio, competitive dividend yield, and revenue diversification.”
Looking at SA stock examiners, New York Community Bancorp (NYCB), The Bancorp (TBBK), Acos Financial (AX), and Peoples Bancorp (PEBO) score the highest quantitative rating among US regional bank stocks.