FRC - First Republic PacWest and Western Alliance Have Sold Off Intensely. Are Any of These Stocks a Buy?
2023-03-20 10:24:47 ET
Bank stocks have come under some pressure this month after the second- and third-largest bank failures in history came out of seemingly nowhere and spooked investors. In particular, bank stocks First Republic (NYSE: FRC) , PacWest Bancorp (NASDAQ: PACW) , and Western Alliance (NYSE: WAL) went on quite a bumpy ride as investors spotted similarities between their balance sheets and those of failed bank SVB Financial . As a result, all three stocks have been sold off intensely.
To paraphrase legendary investor Warren Buffett, with so many investors so scared right now, is it time to "be greedy when others are fearful?" Given the sell-off, are any of these stocks worth buying right now? Let's take a look.
The big thing that brought SVB Financial's Silicon Valley Bank and Silvergate Capital 's Silvergate Bank down is deposits fleeing the bank extremely quickly over concerns about bond losses. Many banks invested excess deposits into lower-yielding, longer-duration bonds too early in the interest rate cycle. When rates rose, these bonds fell out of favor and their value fell deeply underwater because bond yields and bond values have an inverse relationship. Given enough time, these "paper losses" on the bonds would have turned back into gains if the bonds were held to maturity. SVB didn't get that needed time.
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First Republic, PacWest, and Western Alliance Have Sold Off Intensely. Are Any of These Stocks a Buy?