The outlook of American bank stocks is generally mixed at this point. On the one hand, the sector should benefit from the overall strength of the U.S. economy, and the increase in interest rates makes it easier for many banks to generate large net interest margins (NIM) by charging high-interest rates on their loans. But on the other hand, some weaker banks are experiencing large deposit outflows because of the high rates.
Specifically, many of their depositors are taking their funds out of these banks to obtain much higher rates from money markets. The banks experiencing such issues tend to rely on wealthy individuals and businesses with a high percentage of deposits that the FDIC does not insure. Additionally, a large percentage of the deposits of some troubled institutions belong to struggling sectors, such as venture capitalists and crypto investors. Given these points, investors need to know which bank to sell.
One way to determine which banks may be in trouble is to ascertain which bank stocks large investors are selling. That’s because such investors tend to have more access than retail investors. Thus, here are three bank stocks that large investors are selling.
Some consider SoFi (NASDAQ:SOFI) primarily as a tech stock, but it does offer many banking services, including loans, and others call it an “online bank.” Therefore, it’s certainly legitimate to view the firm as being primarily a bank.
In the first quarter, Virginia Retirement Systems headed for the exits on SOFI, selling all 29,300 of its shares of SOFI. Also unloading its entire stake was the hedge fund of the very well-known investor, George Soros. Specifically, Soros Fund Management unloaded all 1.25 million of its shares of SOFI. Additionally, Jefferies, a large investment bank, got rid of all 91,644 shares of SOFI.
Citadel Advisors, the hedge fund owned by the well-known, multi-billionaire investor Ken Griffin, parted ways with nearly 90% of its SOFI stake, or 13.9 million shares. Finally, Pont72, the giant hedge fund owned by multi-billionaire Steven Cohen, an elite investor, dumped 3.9 million shares of SOFI, equal to 76% of its stake.
In a previous column, I explained why SoFi’s “personal loan portfolio could be problematic and unattractive,” making it one of the top bank stocks to sell.
Allianz, the large European insurer, headed for the exits on PacWest (NASDAQ:PACW) last quarter, unloading its entire stake of 219,612 shares. Also selling all of its shares was the Maryland State Retirement and Pension System, which dumped its entire stake of 8,900 shares. And Renaissance Technologies, the well-known, large hedge fund, unloaded all 510,179 of its shares.
Additionally, investment adviser Invesco slashed its stake by 78% or 1.66 million shares, while the State of Wisconsin Investment Board lowered its position by 11.3%. Moreover, the Retirement System of Alabama cut its stake in PACW by 64%, lowering its position by 270,458 shares.
On June 8, Richard Bove, a well-known analyst of bank stocks, started coverage of PacWest with a “hold” rating. Bove noted that the bank had to raise the rates it was offering on deposits during the bank mini-crisis earlier this year. Moreover, with PACW considering “strategic options,” Bove thinks that it may sell itself for less than the current value of PACW stock.
UWM Holdings (UWMC)
Investment bank Jefferies sold its entire stake in mortgage lending company UWMC (NYSE:UWMC) last quarter, unloading 21,696 shares, while the State of Wyoming dropped its entire position of 11,287 shares.
Well-known hedge fund Renaissance Technologies dropped 10% of its stake or 146,200 shares. In comparison, famous investment adviser D.E. Shaw unloaded 20% of its stake or nearly 58,000 shares, and Bank of America slashed its holdings of the mortgage lending company by 82% or 332,631 shares. Another huge bank, Wells Fargo, cut its stake in UWMC by 14.6% or 9,850 shares, while Stifel, a well-known investment bank, cut its stake by 16% or 2,200 shares.
In the first quarter, UWMC’s top line tumbled an incredible 80% year-over-year to $161 million, while it generated a net loss of $138.6 million versus a profit of $453.3 million during the same period a year earlier.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.