Moody’s warning this week about the credit worthiness of more than two dozen banks has created a buy-the-dip opportunity in shares of regional lenders, according to JPMorgan. The credit rating agency downgraded the ratings of 10 regional banks on Monday evening, and signaled concern for about 17 more. Moody’s cited concerns about higher interest rates resulting in weaker bank balance sheets and squeezing their earnings power, which was a major factor in the failure of Silicon Valley Bank and First Republic earlier this year. But JPMorgan analyst Steven Alexopoulos said in a note to clients on Wednesday that those concerns are already priced in to bank stocks, and regional bank stocks now have upside from current levels. “In our view the rationales underlying the ratings actions (as well as changes to outlooks) are already well understood by markets. Along these lines, we actually thought second quarter results from the regional banks demonstrated that the industry is now on much more stable footing following a challenged first quarter which was impacted by the aftermath of several bank failures,” the note said. Moody’s downgraded several banks under Alexopoulos’ coverage, such as Pinnacle Financial, which the analyst rates as overweight. Shares of Pinnacle fell 2.1% on Tuesday. PNFP 5D mountain Shares of Pinnacle fell more than 2% on Tuesday. The downgrades even dragged down shares of banks that weren’t mentioned in the Moody’s report, as the SPDR S & P Regional Banking ETF (KRE) fell 1.3%. That means that many bank stocks look cheaper today than before the downgrades, Alexoloulos said. “With the rating actions having created headlines, we see yesterday’s price action as also having creat[ed] better buying opportunities for regional banks,” the note said. JPMorgan’s top picks among regional banks include New York Community Bancorp. and Western Alliance . Those stocks fell 1.3% and 1.2%, respectively, on Tuesday. — CNBC’s Michael Bloom contributed reporting.
