Stock Market

U.S. Banks Hit by Stock Rout Might Need to Seek Partners, Analysis Suggests

According to industry executives and advisers, some regional banks in the United States may be forced to seek saviors if their stocks don’t rebound following the collapse of two lenders within days. After the collapse of SVB Financial Group and Signature Bank, U.S. regulators announced extraordinary measures on Sunday to offer a safety net to banks pressured by fleeing depositors. However, these measures did little to prop up the banks’ shares, posing a major impediment to their businesses and funding.

Raising private capital could help inspire confidence again in their stocks, as possible outcomes for under-pressure regional banks could see a stronger rival take over a weaker, or cash infusions from investors such as private equity. Over the weekend, some private equity firms had studied the possibility of an investment in banks such as First Republic Bank and PacWest Bancorp, but they did not go ahead as the investors wanted to see what the government would do to alleviate pressure on the banking sector.


With the emergency measures in place, those possibilities could be revived in the coming days. Investors looking at banks that saw sharp declines in their share prices may want to wait a few days before they consider deals or cash infusions. At that point, bank targets may be persuaded to do deals not because they need the liquidity, but to show they have the backing of large institutional investors.

Investors voted with their feet on Monday, putting bank stocks under pressure around the world. The KBW regional banking index fell 5.4% and the S&P 500 banking index dropped 6% in a chaotic day when several banks saw multiple trading halts because of the size of the moves. Weighing on sentiment was the federal government’s statement that shareholders and certain unsecured debtholders would not be protected, which might give investors in the banks pause.

Despite the hurdles to deals, investors may find bargains in the battered sector. Billionaire investor Bill Ackman said on Twitter that regional bank stocks are “an incredible bargain now.” Regional bank stocks are not all alike, and investors can find value by doing their homework and identifying where real value exists, according to Michael Farr, chief executive of investment advisory firm Farr, Miller & Washington, who owns bank stocks including PNC and Truist.


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