Several bank stocks appear ready to rebound in April as the failure of Silicon Valley Bank fades from investors’ minds, according to UBS. The latest data from the Federal Reserve shows that borrowing from the central bank decreased slightly last week, suggesting that the liquidity issues caused by the collapse of Silicon Valley Bank may be easing. UBS analyst Erika Najarian said in a note to clients that the next step could be a rebound for bank stocks. “In any bad accident, there tend to be a lot of rubber neckers, and we sense that the market participation (long and short) in banks is broader than usual. While we believe regularly involved hedge fund investors have understood that contagion risk seems limited, we continue to field questions on more extreme scenarios on liquidity and deposit flight. Thus, we see the stage setting for a rally into earnings,” Najarian said. With many of these stocks still down sharply since the collapse, the upcoming earnings season could be a “clearing event” for shares of regional banks, Najarian said. Two of the stocks that UBS highlighted were Comerica and Western Alliance , which are down about 38% and 52%, respectively, in March. WAL 1M mountain Western Alliance is one of many regional bank stocks that has struggled in March. Banks that are based on the west coast, including Western Alliance , First Republic and PacWest, have been hit particularly hard during the sell-off due to fears that they are more exposed to risky customers like SVB had. Comerica is set to report its latest earnings on April 20, and Western Alliance will likely release its results around the same time. To be sure, Najarian did caution that the rebounds could find a ceiling as the regional banking crisis this month has raised questions about the future profitability of the sector. “Lack of confidence in consensus estimates is especially acute for regional banks, and we expect P/E multiples for banks between $100-700bn in assets to be capped by concerns over net interest income revisions near-term (as many assume that the mega caps enjoyed the lion’s share of the benefit in deposit reallocation) and tighter regulation longer-term,” Najarian said. The potential for more regulation has led many analysts to say that the the biggest banks will be the long-term winners from this crisis. Najarian pointed to Bank of America as one stock that could rally even past earnings, due to its relative valuation to rival JPMorgan Chase . — CNBC’s Michael Bloom contributed to this report.
UBS sees a rally in these bank stocks ahead as bank crisis appears contained
