- Ken Griffin’s Citadel said it bought a 5.3% stake in Western Alliance Bancorporation on Tuesday.
- The Arizona-based regional bank’s stock dived as much as 90% in the wake of Silicon Valley Bank’s collapse.
- Western Alliance shares soared 53% on Tuesday as regional banks rebounded.
Citadel now owns a 5.3% stake in Western Alliance Bancorporation, according to a 13G filing made with the SEC on Tuesday.
Citadel had previously held 1.31 million shares of the regional bank at the end of 2022, and it now owns nearly 6 million shares, representing a quadrupling of its initial stake in the company.
The buy by Citadel was seen as a signal of confidence by investors on Tuesday, with shares of Western Alliance soaring as much as 52%. The spike far outpaced the 8% gain seen in the S&P Regional Banking ETF, and was on par with gains seen in other regional banks that nearly imploded over the past few days, like First Republic and PacWest Bancorp.
Also helping shore up investor confidence in bank stocks is the fact that emergency measures from the Federal Reserve and US Treasury have implicitly guaranteed bank deposits above the $250,000 FDIC coverage limit.
But Griffin was highly critical of those actions, telling the Financial Times on Monday that capitalism is “breaking down before our eyes.”
“The US is supposed to be a capitalist economy, and that’s breaking down before our eyes. There’s been a loss of financial discipline with the government bailing out depositors in full… It would have been a great lesson in moral hazard. Losses to depositors would have been immaterial, and it would have driven home the point that risk management is essential,” he said.
That viewpoint didn’t stop Griffin’s firm from swooping in and buying shares of Western Alliance at a steep discount compared to levels its stock was trading at prior to the implosion of SVB Financial.
And Griffin isn’t the only one who sees opportunity in some of the beaten down bank stocks. Billionaire investor Ron Baron told CNBC that he “modestly increased” his position in Charles Schwab, which saw its stock price plunge more than 30% over the past few days.