EXCLUSIVE: Wedbush Downgraded SVB Prior To Collapse, Other Regional Banks Present Opportunities

Wedbush analyst David Chiaverini appeared Wednesday on Benzinga's "PreMarket Prep Plus" to share his thoughts on a handful of regional banks, including Western Alliance Bancorp WAL and New York Community Bancorp Inc NYCB.

Western Alliance

"We refer to [Western Alliance] as higher risk, but higher return potential because they did see above-average deposit outflows in the first quarter, $6 billion worth, but from the low point up until last week ... deposits have come back by $2 billion," Chiaverini said. 

The bank expects to see $2 billion of deposit growth per quarter over the next few quarters. Western Alliance also plans to continue to offload some assets to help support capital ratios, he noted. 

"We think it's a good risk-reward entry point for Western Alliance here," Chiaverini said.

New York Community Bancorp (NYCB)

When Signature Bank went into receivership following the SVB collapse, NYCB took on $12.9 billion of Signature's loans at a $2.7 billion discount, courtesy of the FDIC. 

The credit quality of those loans is high, so Chiaverini doesn't expect NYCB to lose much on the takeover. 

"So far they're doing better than what they were modeling for, and we think that they will continue to do better because they brought on some key leaders from Signature Bank," he said. "We think that they could outperform the deal metrics that they put out and some of the targets that they put out when the deal was announced, and we think there is some decent upside from New York Community."

Silicon Valley Bank (SVB)

Wedbush notably downgraded SVB Financial Group prior to it becoming the biggest bank failure since the 2008 financial crisis.

SVB's downfall was spearheaded by a bank run, but the negative signs were evident for quite some time, Chiaverini explained.

See Also: Data Shows Exactly How Big Banks Benefited From Collapse Of Silicon Valley Bank And Signature Bank

"When you pull up our downgrade report, it really highlighted all of the risks that ended up taking down the company," Chiaverini said, citing how SVB's end markets were susceptible to outflows given that venture capital-backed firms were showing signs of a slowdown in fundraising activity.

Wedbush also highlighted how SVB had an outsized mortgage-backed securities portfolio. "And that ultimately was what brought them down," Chiaverini added.

A lot of the problems can be traced back to the Federal Reserve's aggressive interest rate response to rising inflation. Inflows for the bank turned to outflows, and SVB was forced to sell some of its longer-term treasuries at a loss to cover increased withdrawal requests.

Chiaverini also shared his thoughts on Valley National Bancorp VLY, Cullen/Frost Bankers Inc CFR and PacWest Bancorp PACW. Check out the full interview below:

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