Bill Gross Calls Bottom on Regional Banks in ‘KRE’ ETF
Famed investor Bill Gross is betting on the stocks behind the SPDR S&P Regional Banking ETF (KRE), the bruised and battered exchange-traded fund that was at the center of the regional banking crisis earlier this year.
“Regional bank falling knife has hit bottom," Gross tweeted in a post where he also wrote that he's buying Trust Financial Corp., Citizens Financial Group Inc., KeyCorp, and First Horizon Corp.
Each of those stocks, other than KEY, is a holding in the $2.5 billion KRE, while all of them are holdings in the competing iShares U.S. Regional Banks ETF (IAT), which has $600 million in assets under management.
On Oct. 30, Gross said that regional banks offered investors “extraordinarily long-term value,” but that he was “waiting just a little bit more” to own some of those banks at the right book valuation and yield.
It looks like he couldn’t wait any longer because his note suggesting that regional banks had hit bottom came just three days later, with the group trading a little bit higher than they were on Oct. 30.
On Friday, regional bank stocks rallied even more, with KRE up more than 4% on the day.
KRE Inflows and Gross’ Bet on Regional Banks
Gross’ bold bet on regional banks mirrors those of investors in KRE, who added $80 million to the regional bank ETF on Thursday.
So far this year, investors have put over $700 million into KRE, but they were most active in March when the collapse of Silicon Valley Bank sent share prices of most regional banks plunging.
KRE was down as much as 28% year-to-date at the time, with losses expanding to 38% in May when another regional bank, First Republic, experienced troubles and was taken over by JP Morgan.
Today, the fund is still down around 28%.
Inflows for the ETF have been more muted recently, but perhaps Gross’ endorsement of regional banks will spur investors to revisit this beaten down pocket of the market.
