3 Stocks to Sell Before the Banking Crisis Gets Worse
Is the banking crisis that has gripped the U.S. over? Investors don’t seem convinced. In recent weeks, bank stocks have trended lower across the board, with regional bank stocks plunging on continued fears. Worries of large unrealized losses and potential runs on deposits have investors large and small looking at which stocks to sell.
The fears gripping retail and professional investors have been stoked by comments from several prominent bankers, notably JPMorgan (NYSE:JPM) CEO Jamie Dimon, who has warned repeatedly that the crisis among U.S. mid-sized lenders is not yet over. The potential that the U.S. government could default on its debt obligations in coming weeks has further raised concern.
Given the turmoil and fear gripping the market right now, it might be best for investors to steer clear of banks for the time being. Here are three stocks to sell before the banking crisis gets worse.
PacWest Bancorp (PACW)
Traders seem to be betting that if PacWest Bancorp (NASDAQ:PACW) doesn’t fail, it is likely to get into serious trouble. In the past month, the regional lender’s stock has fallen 54%. Over the last six months it is down 83%. Now trading as a penny stock, shares of PacWest can’t get much worse at this point. Yet shareholders continue to hit sell on the stock as fears persist that the current banking crisis isn’t yet over.
The selloff in PACW stock accelerated recently after the bank disclosed in a regulatory filing that it lost 9.5% of its deposits over the course of a week. Wall Street was shocked by the disclosure, coming as it did just a few weeks after PacWest Bancorp said that its deposits had stabilized after substantial withdrawals experienced in March of this year. PacWest tried to reassure investors and traders by noting that it has $15 billion in cash to meet any further withdrawal requests. That reassurance is doing little to calm jittery investors.
Western Alliance (WAL)
Another regional bank under pressure is Western Alliance (NYSE:WAL). The lender that primarily operates in the Pacific Southwest has seen its share price collapse 63% over the past six months. Western Alliance’s stock has been whipsawed lately by media reports that it has put itself up for sale. The lender has denied those rumors saying any such talk is not true.
The denials did little to ease the worries of investors and traders who continue to dump WAL stock. Additionally, Western Alliance has also had to contend with concerns about deposit withdrawals, stating recently that its deposits currently stand at $48.8 billion, up from $47.6 billion at the end of March. In all, Western Alliance has $65 billion in assets under management. On paper, the bank seems to be okay. Yet, investors appear to be taking no chances as WAL stock continues to tailspin.
Charles Schwab (SCHW)
To a degree, financial services giant Charles Schwab (NYSE:SCHW) has been dragged lower by the fears plaguing the industry. Landing it on the long list of bank stocks to sell. That said, there are some legitimate concerns about the large amount of unrealized losses Charles Schwab has in its bond portfolio. Should the company be forced to sell its bonds at a loss, the outcome for them would be catastrophic. Fortunately, the likelihood of that happening is extremely low.
Still, investors aren’t taking chances. This is why SCHW stock is down 40% on the year. News that GQG Partners, a top institutional investor in Charles Schwab, sold its entire $1.4 billion stake in the company has further eroded confidence. With $7 trillion in assets, Charles Schwab effectively ranks as the 10th-largest bank in the U.S. However, the company currently has about $28 billion in bond losses on paper. This is the same amount as now defunct Silicon Valley Bank. That fact has investors nervous.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
