3 Profit Opportunities After the Regional Bank Beatdown

By TradeSmith Research Team

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The fight-or-flight response is hardwired into us, as our ancient ancestors had to judge if the twig snap in a nearby bush was caused by a predator looking for its next meal or just a small bird.

As news of Silvergate Bank’s, Silicon Valley Bank’s, and Signature Bank’s implosions spread, investors’ survival mechanism kicked in and led to a sell-off throughout the banking sector: On Thursday, March 9, the KBW Nasdaq Bank Index dropped 7.7%, its worst performance since its 9% drop on June 11, 2020.

But unlike our ancestors, we have the benefit of time to think through the probabilities that danger presents before making rash decisions. Like…

What is the probability that every regional bank has the same EXACT problems as Silvergate, Silicon Valley, and Signature, to a degree that will force them to shut down?

What is the probability that people will completely stop using regional banks?

What is the probability that regional banks will never be a good investment again?

It would be a safe bet to assume the probability of all three is 0%.

A broad sell-off of bank stocks is irrational and an overreaction — it’s the investing version of “flight.” But for the savvy investor, who doesn’t react emotionally but uses data, this has created an opportunity to buy unjustly beaten-down bank stocks that could offer a nice-sized return as investors regain their composure.

And the good news is that you have TradeSmith in your corner, so you don’t have to guess which regional bank stocks to buy and which to completely avoid.

To make things simple, we can look within the iShares U.S. Regional Banks ETF (IAT), which will give us a list of 37 regional bank stocks to analyze with our proprietary investing tools to see what potential winners are hiding within its holdings.

3 Winners Hiding in This Regional Bank ETF

The majority of the IAT holdings are in our Red Zone — bearish territory — and the ETF itself is in a side-trend. But again, while most of the banking sector may be beat-up now, there are still winners to be found.

And putting TradeSmith’s proprietary trading tools to work, we found three stocks that stand out:

  • BOK Financial Corp. (BOKF)
  • F.N.B. Corp. (FNB)
  • United Bankshares Inc. (UBSI)
A theme with all these banks — as you’ll see in just a moment — is that they stress the importance of their diversified revenue sources. And when you think of how concentrations in tech and crypto recently put other banks in trouble, hearing about diverse revenue sources is refreshing… and also reassuring.

Note that all dividend yields and other numbers are as of this writing and may have changed since.

BOKF Snapshot: Founded in Oklahoma in 1910 as a regional source of capital for the energy industry, BOK Financial Corp. now has 116 full-service locations across eight states. It also offers commercial banking, wealth management, and a mortgage division. The regional banker says its core strategy is to “build a bank with diverse revenues that can compete upstream and outperform peers across varying economic cycles.” That strategy proved favorable in the fourth quarter of 2022 as volatility impacted BOKF’s mortgage-related fee-based businesses but was offset by increased investment banking and fiduciary asset management.

Source: BOKF’s Q4 2022 Investor Presentation

BOKF is currently considered a “buy” in our Green Zone, is considered a high-risk investment, and pays an annual dividend of $2.16 (a 2.37% yield).

FNB Snapshot: F.N.B. Corp.’s founding took place in 1864 in Mercer County, Pennsylvania. Today, FNB provides services throughout Pennsylvania, Ohio, West Virginia, the Mid-Atlantic, and the Carolinas; the company is third in market share in Pittsburgh, sixth in Baltimore, 10th in Raleigh, 11th in Charlotte, and 13th in Cleveland. And just like BOKF, FNB points to its diversified revenue sources as one of its strengths:

Source: FNB’s Q4 2022 Investor Presentation

FNB is currently considered a “buy” in our Green Zone, is considered a high-risk investment, and pays an annual dividend of $0.48 (a 4.11% yield).

UBSI Snapshot: Much like the other two regional banking stocks just covered, United Bankshares Inc. has a diversified revenue stream, as it is the parent company of United Bank, George Mason Mortgage LLC, and Crescent Mortgage Company. It has full-service banking options in West Virginia; Virginia; Washington, D.C.; Maryland; Ohio; Pennsylvania; North Carolina; South Carolina; and Georgia, and it has a dominant deposit market share position in several of these states:

Source: UBSI 2023 March Investor Presentation

UBSI is currently considered a “buy” in our Green Zone, is considered a high-risk investment, and pays an annual dividend of $1.44 (a 3.87% yield). As a side note, 2022 marked the 49th consecutive year UBSI increased its dividend, and it’s one of only two U.S. banks that have achieved such a record.

Bottom line: Not giving into fear, uncertainty, and doubt (FUD) is difficult when everyone else around you is panicking. But with our Health Indicator, you can instantly see which stocks are considered healthy and know what moves to make.

Today, we found promising opportunities in BOKF, FNB, and UBSI — three companies considered “buys” in our Green Zone. As the dust from the banking implosion continues to settle, people will start regaining their composure and realize that the sell-off for bank stocks was an overreaction. But by the time they do, you’ll be well ahead of the game, knowing exactly which opportunities to zero in on.