Medicare Agent News: No New Turmoil

Tuesday, March 28, 2023

No New Turmoil

By Nicholas Jasinski | Monday, March 27

Shifting Sands. March’s banking turmoil continues to be a day-by-day affair. It was all optimism today after the announcement in a 1 a.m. press release that First Citizens BancShares would take over substantially all of the assets and liabilities of Silicon Valley Bank. News of the deal brokered by the Federal Deposit Insurance Corp. sent bank stocks and the broader market climbing.

The Dow Jones Industrial Average added 0.6% today while the S&P 500 rose 0.2%. The Nasdaq Composite slid 0.5% as Treasury yields rose.

That follows a doom-and-gloom Friday, when Deutsche Bank stock tumbled after a spike in prices of its credit default swaps, dragging down the whole financial sector.

First Citizens is a Raleigh, N.C.-based regional bank that—before this transaction—had been the 30th or so largest bank in the U.S. by assets. The FDIC will share up to 50% of SVB commercial loan losses in excess of $5 billion with First Citizens. So this isn’t without cost to the federal insurance fund.

Investors certainly liked the deal from the perspective of First Citizens, whose stock jumped 54% to the cusp of a record high. But banks overall benefited from the positive headlines: the SPDR S&P Bank exchange-traded fund (KBE) closed up 2.2% today. First Republic Bank—another regional bank that has been a recent source of concern—closed up 12%.

All that isn’t to say investors think it’s the end of the story and that the damage to the banking sector is all undone. The bank ETF is still down 24% since the start of March.

Expect plenty of continued day-to-day volatility on the latest headlines. The past few weeks have taught many investors that there are hidden risks lurking in corners of the U.S. and European banking sectors.

Analysts are beginning to see opportunities in individual bank stocks, however, especially given the massive drop many of them have suffered in the past few weeks.

Citi’s Keith Horowitz upgraded shares of regionals KeyCorp and M&T Bank to Buy from Neutral today. But it was a relatively lackluster endorsement—he kept his $20 price target on the former, while lowering his target on the latter to $155 from $178.

Barron’s Teresa Rivas has more on Horowitz’s upgrades here. And read Andrew Bary’s recent argument for buying shares in the biggest banks. He tackled the case for high-yielding preferred stocks in U.S. banks in the latest issue of Barron’s. More on that below.