According to analyst Christopher Marinac, the significant decrease in regional bank equities is a critical entry time for investors.
Marinac, Director of Research at Janney Montgomery Scott, says the group’s recent fall provides an appealing entry position for investors because underlying business fundamentals remain unchanged.
“We have obviously stepped on a banana peel in terms of deposit anxiety and panic,” Marinac said on CNBC’s “Fast Money” on Monday.
On Monday, the SPDR S&P Regional Banking ETF fell more than 12% after regulators closed Silicon Valley Bank and Signature Bank. They are the second and third-largest bank collapses in US history, respectively.
“Mid-size and small community banks continue to dominate lending in America,” he adds. “They are wonderful investments.”
Marinac recommends Fifth Third Bank when asked which regional banks appear to be the most appealing. Over the last week, the stock has dropped by more than 27%.
“They’re a really inventive firm in the fintech space,” he said, adding that CEO Timothy Spence has an “outstanding” understanding of interest rate risk and credit.
Marinac also identified Truist as a top sector selection, citing the company’s competitive edge among regional banks as a result of the sale of a piece of its insurance subsidiary. Truist’s stock has fallen 30% in the last five days.
“It will help them pass the stress test in June, so that company is not only surviving but thriving,” he said.
Marinac anticipates that regionals will reduce their losses in the long run.
“Eventually, the storm will pass and the waters will part, allowing banks to resume trading at book value and higher in the future,” Marinac predicted.