2023-10-13 13:49:47 ET
Baird’s senior analyst, David George, said he feels “pretty good” about how regional banks ( NYSEARCA: KRE ) are doing from a stock perspective.
“Where we think the opportunity lies is that the regional banks are extremely cheap,” he said in a CNBC interview on Friday.
Despite the negative rhetoric around the banking crisis, he said, earning report numbers are “really proving the resiliency of their business models and the ability to absorb not only higher deposit costs but also a higher credit cost as the economy normalizes, following the Covid stimulus and the removal of that stimulus.”
The deposit flight panic that the market experienced around March, April, and May has largely subsided, he told CNBC. “And we think that over the next few quarters, you're going to see a bottom in net interest income.”
Baird expects a positive repricing benefit in the form of higher loan yields and higher securities yields, said George, “as banks feel the benefit of loan repricing and asset repricing over the next four to six quarters or so.”
As big banks published their earnings, Citi Group ( C ) is up the most, at 2.62%; Wells Fargo ( WFC ) is up about 2.29%, doing about $6B in earnings this quarter; JPMorgan Chase ( JPM ) is up about 1%, doing $13B of earnings; and PNC Financial ( PNC ) earned almost $2B this year.
Baird also expects the capital market's activities to be “reasonably healthy.”
“We're starting to see hopefully some green shoots with respect to investment banking and capital markets activity going into 2024,” George said.
More on SPDR S&P Regional Banking ETF:
- KRE: Sorry, It's Still Too Soon To Buy Bank Stocks
- S&P Downgrades 5 Regional Banks: What Is The Outlook For KRE?
- KRE: The Fed Wants Large Banks To Consume Smaller Ones
- SPDR S&P Regional Banking ETF declares quarterly distribution of $0.3754
- FDIC slated to propose new long-term debt rules for regional banks next week
For further details see:
Big opportunity in the regional banks with “extremely cheap” stocks – Baird