'We are not in favor of buying common bank stocks right now,' says Loreen Gilbert, CEO of WealthWise Financial, who recommends another way of investing in them.
Recent banking turmoil in the U.S. and Europe has been a source of panic, but analysts are pointing to a pocket of opportunity: the preferred shares of the big banks. "Of all the asset price movements driven by the banking panic in the past few weeks, one of the few notable pockets of value created in markets appears to be subordinated financial debt," Citi said in a April 2 note, referring to preferred shares of banks.
They recently came under the spotlight, with Credit Suisse's AT1 bonds losing all their value after the bank was taken over by UBS. AT1s are a type of debt that is considered part of a bank's regulatory capital. The debt can be written down to zero in emergency situations, such as when a bank's capital ratio falls below a specific threshold. Still, Citi analysts are bullish on this type of investment, saying it's an opportunity right now as prices drop after the crisis.
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