These two stocks are big winners in a tumultuous year for banks
In 2023, the financial industry faced its greatest crisis since the Great Recession as the four major banks, including Silicon Valley Bank, Signature Bank, First Republic, and Silvergate Bank, collapsed. Another large bank, Credit Suisse, was merged into UBS Group (NYSE:UBS) in a deal brokered by Swiss regulators.
But the crisis extended far beyond these banks as the entire industry collapsed. As a result, the federal government launched a number of initiatives to support the industry, especially banks that were on the brink of collapse.
Large megabanks and super-regional banks were able to weather the crisis fairly well because they had some benefits by having adequate liquidity and providing safety among anxious banking customers. But smaller regional and community banks have had more trouble stemming deposit outflows and maintaining liquidity.
As the year went by, the situation began to stabilize, and in the fourth quarter, bank stocks that had been on the decline soared. As of January 4, banking stocks have risen about 26% over the past three months.
Customer Bancorp recorded the highest returns.
A strong fourth quarter provided a much-needed boost to banking stocks, but the industry still ended the year in the red. The KBW Nasdaq Bank Index, which tracks 24 large publicly traded banks, had fallen 6.9% over the past year as of Jan. 4. The KBW Nasdaq Regional Banks Index improved slightly over the past 12 months, down 5.2%.
Last year, returns were widely dispersed among more than 300 banking stocks, with some falling more than 75%. But at the higher end of the spectrum, some bank stocks are actually up as much or more.
Who has performed best in the past year? Customer Bancorp (NYSE:CUBI) is up about 94% over the past year as of January 5th. The West Reading, Pennsylvania-based bank is one of the leading banks in the cryptocurrency industry with its blockchain payment network. Facilitates cryptocurrency trading for large institutional cryptocurrency clients.
Customers Bancorp thus benefited from the banking crisis because the leaders in its field, Silvergate Bank and Signature Bank, both failed during the crisis. As a result, a significant portion of the bank’s customers and deposits flowed to Customers Bancorp at a time when most banks were struggling to attract deposits.
In the third quarter, the company’s deposits were $18.2 billion, up 1.4% from the second quarter of 2023 and up 3.8% year-over-year.
Client Bancorp also bolstered its business roster by acquiring a $631 million venture bank loan portfolio from the Federal Deposit Insurance Corporation (FDIC) at a discount in June. The loan portfolio was managed by Signature Bank, Reuters reported.
Other big winners among banks in 2023 include: First Citizen BancShares (NASDAQ:FCNCA) stock had returned approximately 85% over the past year as of January 5th.
First Citizens, headquartered in Raleigh, North Carolina, also received a boost from the banking crisis when it acquired most of the assets of a failed Silicon Valley bank from the FDIC, which founded Bridge Bank.
With the acquisition, First Citizens nearly doubles the size of its predecessor, Silicon Valley Bank, to $110 billion in assets and is now the 15th-largest U.S. bank with $214 billion in assets. This acquisition positions First Citizens as one of the leading banks for startups and entrepreneurs in Silicon Valley and other innovation centers across the United States.
looking ahead
Both of these banks have been transformed by the banking crisis and will continue to thrive in 2024. Both trade at reasonable to low valuations and have significant growth catalysts, especially as leaders in their respective niches that will likely push interest rates upward. The environment gets better.
Both companies are scheduled to report fourth-quarter earnings this month, so interested investors should keep an eye on these reports to gain more visibility into the year ahead.
