Let me expand a little bit… Basil III was unknown and many banks (money center and big regional’s) were building capital. Looks like BIII endgame is not going to be as onerous as expected and some of the regionals have mitigated their CRE exposure and pretty much have pulled back on lending. Meaning they are sitting with significant excess capital and post stress test and BIII endgame announcement and new liquidity rules, they will get enough clarity and start buyback.
There are many ways you can play this.
- You can buy equity straight
- You can buy their debt/ preferred
- You can buy call spreads (options) for 15% annualized return with 20% to 30% downside protection
Something to think about… BTW, I have talked about the buyback here