NEW YORK (
) -- Investing in regional banks strong enough to buy failed banks from the
Federal Deposit Insurance Corp.
is increasingly looking like a winning strategy.
The latest example of a regional bank acquirer getting a nice share boost comes courtesy of
City National Corp.
The Los Angeles-based lender saw its stock price climb nearly 14% on Monday following Friday's acquisition of
Imperial Capital Bancorp
( IMP) from the FDIC.
City National follows the examples of
East West Bancorp
, both of which lately saw huge share price gains the first trading day after they bought failed banks from the FDIC.
Not every acquirer of a failed bank sees such an immediate payoff. Shares of
, which bought People First Community Bank Friday, were up just 1.3% as of Monday afternoon. One reason for the muted investor enthusiasm may be that the FDIC will receive a "clawback" payment from Hancock if the losses from People First's loans turn out to be more moderate than expected, according to a report from Sterne Agee & Leach.
Still, there appears to be lots of money to be made buying the carcasses of failed banks. The strategy has worked for
in its acquisition of
from its purchase of
Even more controversial deals, such as
's purchase of
Bank of America
's acquisition of
show plenty of potential for success. Some would even argue they are already a success.
Private equity investors have been getting in on the act as well. Of late their tactic has been to invest in publicly-listed regionals that they think can buy failed banks. That's what
did in November, taking a 9.9% stake in East West Bancorp. Warburg Pincus made a similar play in July, when it invested $115 million in
How can retail investors capitalize on this trend? A good starting point would probably be to
. City National and Hancock were both on that list.
Written by Dan Freed in New York
A profile of
, one of the acquisitive regional players.