Retail Traders Ignore Banking Crisis and Buy the Dip in Lenders

(Bloomberg) — Individual investors have been pouncing on battered bank stocks, pouring money into heavyweights like Bank of America Corp., despite lingering concerns about an industry crisis after several lenders collapsed.

Most Read from Bloomberg

Net purchases of Bank of America stock this year soared to $769 million, catapulting the financial giant past former darlings like Netflix Inc. and Rivian Automotive Inc., data compiled by Vanda Research show. Retail traders even bought more than $200 million of embattled First Republic Bank stock in that span, according to Vanda.

“Buying the recent dip in bank share prices may prove to be a good long-term play,” Ben Laidler, global market strategist at social trading and investing platform eToro, said in a statement. “Even those who jumped into Credit Suisse may ultimately make good, as they now receive UBS shares in the takeover.”

Users of eToro snapped up shares of Credit Suisse Group AG, BNP Paribas SA and BofA despite big drops, the company’s quarterly data show. The number of users holding Credit Suisse stock surged 242% across the first three months of 2023, while those invested in BofA and BNP Paribas jumped 38% and 36%, respectively.

Of course, these new holders of bank stocks may have to wait to profit from their trades, since the bulk of the buying came while the shares were still plunging. For example, First Republic had its largest net inflow on March 17, when shares crashed as much as 35% to about $23 after the San Francisco bank announced it received a rescue package, according to Vanda. The stock is now trading at less than $14.

Similarly, individuals made the majority of their net purchases of Credit Suisse’s US-listed shares over a three-day stretch in March, when the bank was worth more than double Tuesday’s closing price of 89 cents.

The buying preceded a warning Tuesday from JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon that the current banking crisis is “not yet over,” and even when it is the consequences could be felt for years.

The activity comes as the closely watched bull-bear spread from the weekly American Association of Individual Investors (AAII) survey shows individual investors are still mostly bearish on the stock market. Still, a majority of investors surveyed by eToro said they’re allocating the same amount or more to stocks as they have in tamer market environments. Roughly 90% also reported plans to keep buying stocks in the coming months.

Two industries that have seen selling pressures among eToro users are airlines and carmakers, according to its data. Those investors fled names like United Airlines Holdings Inc., Rolls Royce Holdings Plc, and Deutsche Lufthansa AG. On the flip side, Tesla Inc., Amazon.com Inc., and Apple Inc. have maintained their position as the most widely held stocks among clients on the platform, with the trio seeing year-to-date advances of 56%, 24%, and 28%, respectively.

–With assistance from Matt Turner.