{"id":7376,"date":"2023-10-31T03:05:01","date_gmt":"2023-10-31T03:05:01","guid":{"rendered":"https:\/\/infundpros.com\/markets\/bill-gross-is-staying-away-from-regional-banks-except-for-these-three\/"},"modified":"2023-10-31T03:05:02","modified_gmt":"2023-10-31T03:05:02","slug":"bill-gross-is-staying-away-from-regional-banks-except-for-these-three","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=7376","title":{"rendered":"Bill Gross Is Staying Away From Regional Banks. Except for These Three."},"content":{"rendered":"
\n

There are plenty of reasons to shy away from regional banks but that doesn\u2019t mean that the sector is devoid of opportunity\u2014just ask one-time bond king Bill Gross.<\/p>\n

Gross has been warning against regional banks for some time, on Monday comparing the sector to a \u201cfalling knife\u201d on X, the platform formerly known as Twitter. Although even in his bearish assessment, he admitted that there is \u201cextraordinary long-term value\u201d to be had in the sector as some names begin to trade at 60% book value and offer 7% yields.<\/p>\n

\n

While that may be Gross\u2019 broad thesis for regional banks, higher yields may be more of an enticement than trading well-below book value.\u00a0<\/p>\n

\u201cThere is much value there. Today\u2019s action very encouraging. Buying a little despite earlier tweet,\u201d Gross told Barron\u2019s<\/em> via an email through a spokesperson. The
\n SPDR S&P Regional Banking ET
\n F (ticker: KRE) advanced 1.5% in Monday\u2019s trading, outpacing the 1.2% gain in the S&P 500. But Gross isn\u2019t looking at the index, he has been buying \u201ca little\u201d of
\n Citizens Financial Group
\n (ticker: CFG),
\n Truist FinancialCorp<\/span>
\n oration (TFC), and
\n KeyCorp
\n (KEY), Gross said through his spokesperson.<\/p>\n

All three offer yields north of 7% and all trade below book value but not quite to the level Gross tweeted. Citizens meets the mark on both criteria, trading at 50% of book value as of the close of the third quarter whereas Truist trades at 68% book value and KeyCorp trades at 87%. Still, for all three, a yield above 7% when Treasuries offer 5% could be a compelling opportunity.\u00a0<\/p>\n

Of the broader regional bank sector, Gross tweeted last week that he was waiting to make buys but considered regionals to be \u201cgreat long term holds.\u201d<\/p>\n

Gross\u2019 assessment of the sector is similar to the apprehension a lot of other market participants have felt. The Federal Reserve\u2019s rapid push to tamp down on inflation by raising interest rates has been an immense problem for banks\u2014leading to the collapse of three regional banks this spring. Even though few expect other banks to face the same fate that befell Silicon Valley Bank and others, banks were sitting on $558 billion in unrealized losses in their securities portfolio as of the close of the second quarter, according to the Federal Deposit Insurance Corp.\u00a0<\/p>\n

Few banks expect to have to realize those losses but the banks are basically left with \u201cfrozen assets\u201d on their balance sheets, Barry Knapp, managing partner of Ironsides Macroeconomics, told Barron\u2019s. <\/em>This has led Knapp to conclude that small and medium-size banks are in an \u201cunworkable situation\u201d that is exacerbated by the inversion of the yield curve, in which rates on short term debt have exceeded rates on longer-term debt.\u00a0<\/p>\n

\u201cBanks can\u2019t grow, and the curve is impairing profitability,\u201d Knapp said. With losses on their balance sheets, many banks are going to be unable to lend. This hurts regional banks that are more dependent on revenue from interest they earn on loans versus larger peers that derive a meaningful portion of their revenue from fees.\u00a0<\/p>\n

With bonds being the bane of most banks\u2019 existence, it may make sense for a bond guy like Gross to spot opportunities.<\/p>\n

Write to Carleton English at carleton.english@dowjones.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

There are plenty of reasons to shy away from regional banks but that doesn\u2019t mean that the sector is devoid of opportunity\u2014just…<\/p>\n","protected":false},"author":1,"featured_media":7377,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":{"0":"post-7376","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"\nBill Gross Is Staying Away From Regional Banks. 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