The collapse earlier this year of Silicon Valley Bank led to significant price drops in the entire financial sector, but some regional banking names among the small caps look a bit like value stocks now. The extraordinary level of selling in early March for this group may have created opportunity.
Banc of California: A potential value stock
Banc of California Inc. (BANC, Financial), for example, now trades at a 27% discount from its book value with a price-earnings ratio of 8.54. That is definitely below the Shiller price-earnings ratio for the Standard & Poor’s 500, which comes in at 30.69. Financial stocks typically trade with multiples under that of the market as a whole, but usually not by that much.
The bank has a market capitalization of $674 million and is actively traded on the New York Stock Exchange with an average daily volume of 1.12 million shares. This year’s earnings are up by 99% and, over the past five years, by 26.40%. Shareholder debt easily exceeds long-term debt. Banc of California pays a dividend of 3.32%.
The daily price chart is here:
You can see the sudden March selloff and the buying that came in during July.
Fulton Financial: A long-standing player
Another possible value in the sector may be Fulton Financial Corp. (FULT, Financial), a Lancaster, Pennsylvania-based bank with a market capitalization of $2.06 billion. It has been in business since 1882 and now offers products and services in its home state as well as in New Jersey, Delaware, Maryland and Virginia.
The Nasdaq-traded stock trades with a price-earnings ratio of 7.51 and at 88% of its book value. The past five years' earnings growth comes to 9.40% and this year’s is up by 3%. Average daily volume is 1.71 million shares. Fulton Financial pays a 4.94% dividend.
The daily price chart looks like this:
The selling in March continued into May on this one. Note how it tagged the 200-day moving average in early August and then backed off.
Hancock Whitney: A Southern bank
Hancock Whitney Corp. (HWC, Financial) is based in Gulfport, Mississippi with branch offices in that state as well as in Alabama, Florida, Louisiana and Texas. The market capitalization for the bank is $3.27 billion and the Nasdaq-traded stock has an average daily volume of 531,000 shares.
Now trading at a 5% discount to its book value, Hancock Whitney has a price-earnings ratio of 6.52. This year’s earnings are up by 14.60% and the past five years shows growth of 17.10%. Long-term debt for the company is vastly exceeded by shareholder equity. Investors receive a dividend of 3.07%.
Here’s the daily price chart:
This is another one with a bottom in May and then buying returning in July.
Final thoughts
The entire financial services sector is dependent to a great extent on the action of the Federal Reserve, which may take actions to increase interest rates and keep them higher for longer than expected. Whether these regional banking stocks found a bottom in the March to May period remains to be seen, of course, but right now, they are interesting from a value standpoint.
This is not investment advice. It is for educational purposes only.
