Bankers Cash Out on Trump Rally -- WSJ
April 28 2017 - 3:02AM
Dow Jones News
Insiders at regional lenders net $1 billion from stock sales
since U.S. election
By Rachel Louise Ensignand Tom McGinty
Investors rushed into regional and community bank stocks after
the U.S. election, encouraged by higher interest rates and
potential regulatory relief. Top executives and directors at banks
used the rally for a different reason: to cash out.
Insiders at publicly traded commercial banks with a market value
greater than $1 billion, but excluding the largest national banks,
sold about $1.4 billion in their company stock between the election
and the end of March, up 65% from the 10-plus months in 2016 before
the election, according to an analysis by The Wall Street
Journal.
The sales netted executives and directors at banks like PNC
Financial Services Group Inc. and U.S. Bancorp $1 billion when
taking into account the cost of exercising options.
The moves are in line with the behavior of insiders at the
biggest U.S. banks, which was the subject of a Wall Street Journal
article in January.
Executives at some of the country's largest banks sold about
$163.5 million worth of stock since the presidential election, more
than in that same period in any year since before the financial
crisis, according to an updated Wall Street Journal review of
securities filings.
At the nearly 100 community banks and regional players included
in the Journal's latest review, net gains from selling since the
election totaled about $7.2 million per day -- nearly four times
the 2016 pace before the election.
For years, bank stocks lagged behind the broader stock-market
rally as low interest rates and a regulatory overhang from the
financial crisis weighed on results. Last year started with the KBW
Nasdaq Bank index falling as much as 23% by mid-February due to
recession fears. During that time, insiders did very little
selling, netting just $13 million on share sales in the first two
months of 2016.
After Donald Trump's surprise election win, potential tax and
regulatory relief from the new administration gave bank investors a
rosier view. Interest rates also started to rise, which helps bank
profits.
While bank stocks have flagged a bit in recent months, the KBW
index still rose by more than 22% between the election and the end
of March, the period of increased insider selling.
Alex Lieblong, a director at Arkansas-based Home BancShares
Inc., netted about $25 million in sales of the bank's stock after
the election, compared with about $1 million before the election in
2016. The 66-year-old investor said his estate planners told him
that he needed "a little diversification here in case you get hit
by the proverbial bus."
Bank insiders still have vast holdings in their companies.
Executives often are given shares through stock or options grants
as part of compensation. Sometimes, they purchase shares on the
open market or through their retirement plans. In 2016 before the
election, 255 insiders at these lenders bought $42 million worth of
stock. After the election through the end of March, the purchases
amounted to $5 million from 55 insiders.
Private-equity investors with board seats also sold. Four of
them accounted for more than $310 million of the sales, or about
22% of the total, since the election. These same investors sold $46
million in 2016 before the election.
While it is relatively unusual for private-equity investors to
have stakes in banks due to regulatory restrictions, some got
involved during or shortly after the crisis.
Oaktree Capital Management LP and Thomas H. Lee Partners LP, for
instance, in 2011 invested more than $350 million in Puerto
Rico-based First BanCorp as a part of a capital raise. The two
private-equity investors, which declined to comment, sold about
$257 million worth of First BanCorp stock in December and February.
The stock is up 62% in the last 12 months through Wednesday.
Another recent seller: U.S. Bank CEO Richard Davis, who retired
from that role earlier this month. In November and January, he sold
$73 million of stock, netting $28 million after exercise costs. The
bank said the moves were an exercise of options from 2008 and
declined to comment further on Mr. Davis's behalf.
PNC CEO William Demchak, meanwhile, sold $40 million, netting
$21 million.
Both Messrs. Demchak and Davis remain significant shareholders
in their banks. The stocks have both hit record highs in 2017 after
steadily recovering since the financial crisis.
Given "the rise in PNC's stock price during this time frame, I
viewed it as an opportune time to exercise" stock options that were
set to expire in the next two years, Mr. Demchak noted.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Tom
McGinty at tom.mcginty@wsj.com
(END) Dow Jones Newswires
April 28, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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