Regional bank executives buying shares in their own companies hit a three-year high in the United States during the second quarter of 2023 as they rushed to restore investor confidence in their firms following the collapse of Silicon Valley Bank.
Such a buying frenzy was last witnessed in the first quarter of 2020, when stocks sold off in reaction to the spread of COVID-19, according to investment research firm VerityData.
US Bancorp, East West Bancorp, Zions Bancorp and SoFi Technologies are some of the names from the 244 banks that saw heavy insider buying in the second quarter.
A total of 778 executives and other company officers bought own bank shares in the second quarter through May 26, compared with 524 buyers during all of first quarter of 2023, when the collapse of three regional lenders sparked a massive selloff in U.S. bank stocks, data from VerityData showed.
The ratio of buyers to sellers in the regional banking sector has also hit a record high in the second quarter of 2023, according to the data.
"Insiders should have a pretty good sense of how their own deposit base is holding up, so we wouldn't expect purchases if things were falling apart behind the scenes," Eric Compton, equity strategist at Morningstar, said.
"This remains one of the few 'closer to real-time' signals you can get in between earnings reports."
Markets tend to track trading activity of executives and other shareholders of a company as investors believe the insiders have more information of the company's outlook.
Company executives are mandated by the U.S. Securities and Exchange Commission to disclose all their trading activity within two business days following the transaction date.
Bank executives are sending a signal after the regional banks reported quarterly earnings that it is clear with the investments in their own bank shares that markets over-reacted to the collapse of two regional lenders, Ben Silverman, vice president of research at VerityData, said.
Bank stocks have stabilized in recent weeks, but haven't recovered their March losses. Both the S&P 500 Financial index and KBW Regional Banking index are in the green for May, but are down over 4% and 22%, respectively, in the year so far.
In the week ended March 15, deposits at small banks fell more than twice the previous record drop and recorded the biggest decline as a percent of overall deposits since the week ended March 16, 2007. Bank deposits, however, started stabilizing from April.
(Reporting by Shubham Batra in Bengaluru; Editing by Shounak Dasgupta)