By Ketki Saxena
Investing.com -- As fears of banking trouble are reignited once again, major investors are reevaluating their exposure to US regional bank stocks. Cohen & Steers Inc., a significant buyer of such securities, has opted to reduce its holdings due to concerns over these institutions' resilience amidst current market stressors.
The firm's decision comes after several small lenders faced collapse earlier this year, including the high-profile failure of Silicon Valley Bank in March. These incidents have highlighted potential weaknesses within the sector and prompted a need for more cautious investment strategies. Elaine Zaharis-Nikas, senior portfolio manager at Cohen & Steers, explained that her company is now focusing on different metrics like liquidity, loans and assets when assessing investments in preferred shares issued by US regional banks.
Data compiled by Bloomberg reveals that since Silicon Valley Bank's downfall, exchange-traded preferreds from banks with market capitalizations below $10 billion have lost over one-fifth of their value on average. In contrast, similar preferred shares from Wall Street giants such as Bank of America Corp (NYSE:BAC)., Morgan Stanley (NYSE:MS) and Goldman Sachs Group Inc (NYSE:GS)., experienced an average gain of roughly 0.5% during the same period.
Cohen & Steers ranks among the top ten investors in exchange-traded preferred shares issued by US banks – securities used to meet regulatory requirements much like European banks' additional tier 1 notes following the global financial crisis.
This week brought further challenges for investors as JPMorgan Chase & Co (NYSE:JPM).'s acquisition agreement with First Republic Bank excluded ownership transferal for either its preferred shares or unsecured bonds. Trading of First Republic Bank's preferreds, which had already plummeted over 90% since early March, was subsequently suspended. The New York Stock Exchange announced it would begin delisting proceedings for eight First Republic securities.
Cohen & Steers is not eager to reestablish significant exposure within US regional banking just yet – concerns persist about additional distressed lenders potentially emerging from current market conditions. Zaharis-Nikas explains: "We want to see some more stability… We are waiting to see if the deposit flight has stabilized."