The former bond king has been buying 'a little' of Citizens Financial, Truist Financial, and KeyCorp.
There are plenty of reasons to shy away from regional banks but that doesn’t mean that the sector is devoid of opportunity—just ask one-time bond king Bill Gross.
While that may be Gross’ broad thesis for regional banks, higher yields may be more of an enticement than trading well-below book value. All three offer yields north of 7% and all trade below book value but not quite to the level Gross tweeted. Citizens meets the mark on both criteria, trading at 50% of book value as of the close of the third quarter whereas Truist trades at 68% book value and KeyCorp trades at 87%. Still, for all three, a yield above 7% when Treasuries offer 5% could be a compelling opportunity.
Gross’ assessment of the sector is similar to the apprehension a lot of other market participants have felt. The Federal Reserve’s rapid push to tamp down on inflation by raising interest rates has been an immense problem for banks—leading to the collapse of three regional banks this spring.
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