6 Beaten-Up Regional Bank Stocks Ready For A Rebound

After Moody’s cut credit ratings, regional banks are feeling the heat again. However, some smart analysts think there are select bargains in the trash bin.

_{By Jessica Nix, Forbes Staff}

After a rough spring for banks following the collapse of Silicon Valley Bank and Signature Bank, more bad news is hitting the sector. Last week, Moody’s Investor Services, which provides credit ratings and risk analysis for stocks, cut the credit ratings of 10 small and mid-sized banks, citing higher costs and lower profits. By Tuesday morning, the Dow Jones fell by 400 points in response.

Moody’s actions are placing another strain on an already beaten-down sector. Regional banks stocks, as measured by iShares U.S. Regional Bank (IAT) ETF, are down 19% year-to-date versus a 16% gain for the S&P 500. However, veteran Wells Fargo banking analyst Michael Mayo notes that the Moody’s report is looking back on the past 15 months and following the trend of equity analysts who have lowered the average earnings estimate for banks by 20%. The Federal Reserve has already pushed up rates to stem inflation and signaled its willingness to raise rates again. It has also announced plans to raise capital requirements for large banks.