Wall Street analysts make big calls on bank stocks in wake of SVB failure

Wall Street analysts are wasting no time trying to make some big calls on stocks that have been swept up into the discussion of the Silicon Valley Bank and Signature Bank meltdowns, even if it means forgetting the stock-picking lessons learned during the height of the 2008/2009 financial crisis.

Silicon Valley Bank’s collapse on Friday was the second-largest bank failure in the U.S. while Signature Bank represented the third-largest banking bust.

Regulators stepped in late Sunday to backstop depositors of the banks to prevent the start of a wider financial system crisis.

Despite the extraordinary efforts, regional bank stocks such as First Republic (FRC) crashed 65% as of Monday afternoon. Western Alliance Bancorp (WAL) plunged 61%. Charles Schwab (SCHW) lost 11% after putting out a press release reaffirming confidence in its business and its recent business trends.

Even the mighty JPMorgan (JPM) saw 2% wiped off its market cap by midday trading.

“We have a least-preferred view on the U.S. financials sector,” warned Solita Marcelli, UBS chief investment officer for Americas. “While some of the selling in certain banks seems overdone, it’s hard to know when the ‘crisis of confidence’ will improve.”

Here are a couple of bullish bank stock calls that have caught Yahoo Finance’s attention amid a frenzied day for investors:

First Republic stock tanks. JPMorgan says Buy.

JPMorgan analyst Steven Alexopoulos makes his case on First Republic Bank:

“Despite industry headwinds, First Republic continues to enhance its liquidity position and serve client needs. In a press release issued on Sunday evening, First Republic further strengthened its existing liquidity position which now stands at more than $70 billion (all unused) and include borrowing capacity from the Fed, access to funding from the FHLB [Federal Home Loan Banks], and access to additional financing. Of note, this total amount of liquidity excludes any amount that First Republic is eligible to obtain under the Fed’s new Bank Term Funding Program announced yesterday. Additionally, Founder and Executive Chairman Jim Herbert and CEO and President Mike Roffler noted that the company continues to fund loans, process transactions, and serve client needs through exceptional client service.

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We Would Be Buyers of FRC on New Development. Within our coverage, FRC was one of the banks that underperformed sharply in recent days, and following this update, we would be buyers on this weakness of FRC shares as the bank benefits from bold moves from the agencies along with the bank filing a press release highlighting access to $70B in liquidity in addition to the new Fed facility.”

JPMorgan stock a ‘fortress’ investment in banking, Wells Fargo says

Wells Fargo bank analyst Mike Mayo upgraded his rating on JPM to Overweight:

“JPM epitomizes our theme of ‘Goliath is Winning,’ which should benefit both offense (market share gains) and defense (more diversified) in these less certain times. JPM is battle-tested through downturns, aided by its “fortress balance sheet”; as the largest U.S. bank, it epitomizes bank industry de-risking that has taken place since the GFC [Great Financial Crisis] in terms of leverage (almost 1/3 as much), liquidity (est. 50%+ more), and losses (structurally lower); recent industry developments should further its ability to gather core funding and act as a source of strength.

JPM has gained meaningful market share in each of its business lines (roughly 10% share on avg.), and has previously excelled in times like these when other financial firms have issues; this is aided by its multi-channel, multi-product, and multi-geographic approach—i.e. diversification benefits offense, too.”

Citi defends Charles Schwab stock

Citi analysts Chris Allen and Alessandro Balbo upgraded their rating on Charles Schwab to Buy from Neutral, noting a “compelling” entry point into the stock:

“We see near-term revenue/earnings headwinds from rising funding costs and continued client cash sorting, but we believe these are reflected in the current stock price. While client cash sorting is a pressure point and we expect to see the magnitude at a higher level than prior cycles, we do not see a material risk to deposits leaving Charles Schwab given the composition of its deposit base and customer protections ($750K in insurance given 3 bank charters).”

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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