Jason Alden/Bloomberg
More banking experts are buying shares in their own companies, a vote of confidence in the industry after a crisis sparked by the collapse of four regional lenders earlier this year.
The number of buyers has already jumped to 778 in the second quarter through May 26 from 524 in the first three months of the year, according to research firm VerityData, which said the increase is being driven by small and midsize banks. More buyers stepped up even as share prices fell to multi-year lows in early May.
“Members of this group express a strong belief that the regional banking system as a whole is sound, that there is no danger of a full-scale collapse,” Ben Silverman, director of research at VerityData, said in an interview. “This means long-term confidence in the ability of these banks to weather whatever short-term storms there may be.”
Insiders aggressively bought shares in their own companies after the collapse of regional banks, including SVB Financial Group’s Silicon Valley Bank, in March, pausing only when rules banning insider trading near the release of quarterly results They entered into force at the end of the quarter. Buying rose steadily again when the trading window reopened, with May levels higher than March levels, according to the data.
The second quarter has so far been the most active period for insider buying in the industry since the first three months of 2020, when stock prices plunged at the start of the Covid-19 pandemic, according to the report.
“This is the kind of insider information you want to see in a sector when it goes down,” Silverman said. “As an investor, if you feel these are good banks that will be here for the long term, then it’s a buying opportunity.”
Another measure of insider sentiment is the buyer-seller ratio, which compares the buying of a single insider to the selling of a single insider. The average quarterly ratio for banks since 2011 has been 1.8 to 1, according to the report. So far in the second quarter, the ratio is at an all-time high of 14.7 to 1.