Many people, including Bill Ackman, are worried that Silicon Valley Bank’s collapse will lead to contagion in other banks and create financial instability. But regional banking expert Tim Melvin joined Benzinga Live on Friday and gave quite a different take: that regional banks will be just fine.
Melvin explained in the interview that the problems that Silicon Valley Bank, a subsidiary of SVB Financial Group SIVB, faced were more specific to the tech and venture capital industry. Regional banks in other parts of the country that do not have the same exposure to the tech startup industry are in a good position, Melvin said.
“The deposit demand from venture capital and crypto should not be replicated across other industries across the country,” Melvin said. “Is a bank run possible? I frankly don’t see it.” Melvin said.
In fact, Melvin pointed to a number of regional banks that traded down Friday in sympathy with SVB, like Western Alliance Bancorporation WAL and HomeStreet Inc HMST, as names that could be good buying opportunities. At the time of Melvin’s interview, Western Alliance shares were trading down about 40% on the day. The stock went on to trade higher by about 20% from that point, and ended up closing down by around 20%.
Melvin also pointed out that not only is there upside potential for a lot of the regional bank names, but most of the names also pay a nice dividend. HomeStreet for example pays a dividend of around 6.7%, higher than what is available through bonds.
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