Bankers Cash Out on Trump Rally -- WSJ

By Rachel Louise Ensignand Tom McGinty Features Dow Jones Newswires

Insiders at regional lenders net $1 billion from stock sales since U.S. election

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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.

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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)