HoldCo Eyes Struggling U.S. Banks, Signaling Potential Changes and Opportunities for Investors

Imagine if your local school had a principal who kept getting raises, even while test scores dropped. Now, picture a group of parents banding together to demand the school do better. That’s a lot like what’s happening with some American banks and a small but mighty hedge fund called HoldCo Asset Management.

Why This Matters for Investors

When banks don’t perform well, it can hurt the money people invest in them. HoldCo is pushing for change at banks they think are not doing right by their shareholders. Their actions could shake up the whole banking sector, affecting stock prices, mergers, and even your retirement accounts if you own bank stocks.

The Bull Case: Why HoldCo’s Actions Could Be Good

• Shareholder Power: HoldCo wants banks to put investors first. They believe CEOs shouldn’t get big paychecks if the bank isn’t doing well.
• Better Returns: When banks are managed better, their stock prices often go up. HoldCo is pushing for banks to buy back their own shares or even merge with stronger banks.
• More Accountability: By calling out bad management, HoldCo hopes to make boards and CEOs more responsible with investors’ money.

The Bear Case: Why There’s Risk and Pushback

• Industry Disruption: Not everyone likes HoldCo’s style. Some banks have even banned them from conferences, worried about too much outside pressure.
• Merger Risks: Merging banks can lead to job losses, branch closures, or unexpected problems. Not all deals work out for shareholders.
• Market Volatility: Activist campaigns can cause big swings in stock prices, which can make investing in regional banks more unpredictable.

What’s Happening Now

HoldCo, led by Vik Ghei and Misha Zaitzeff, has taken on banks with over $200 billion in assets. They recently pushed Comerica to sell itself to Fifth Third Bank for nearly $11 billion. Now, they’re going after more banks, including Columbia Bank and BankUnited, demanding changes or threatening to replace their leaders.

HoldCo says many regional banks are “undervalued” because CEOs care more about personal pay than shareholder profits. For example, Columbia Bank’s CEO got an 80% raise while the bank’s stock fell 36% during his time in charge. HoldCo wants banks to stop risky mergers and instead use their money to buy back cheap shares, which could help boost stock prices for investors.

Industry Context & Credible Stats

Regional banks have struggled since the 2023 crisis that saw Silicon Valley Bank and First Republic fail. In fact, the S&P Regional Banking ETF is still about 14% below its 2021 highs. Historically, activist investors have helped turn around companies in other sectors, and according to a Harvard Law study, activist campaigns can lead to better performance—if the right changes are made.

Lessons from HoldCo’s Past

HoldCo’s founders have a history of finding value where others see trouble. After the 2008 crisis, they made money betting on the debt of failed banks. Their tough approach—even battling the FDIC in court—helped them build a reputation as determined investors willing to fight for returns.

What Could Happen Next?

Some banks are already reviewing their strategies, worried they’ll be HoldCo’s next target. Investors have noticed: after HoldCo’s moves, Columbia Bank’s stock jumped 4.4% in a single day, and BankUnited rose 2.1%.

HoldCo says they’ll keep calling out bad decisions, even at banks where they don’t own shares. Their activism could mean more mergers, leadership changes, and a shake-up in how banks operate—all of which matter for anyone investing in bank stocks.

Investor Takeaway

• Watch for more bank mergers: Activists like HoldCo are likely to push for deals, which could affect stock values and sector stability.
• Check management incentives: When investing in banks, look at how CEOs are paid and whether their goals match up with shareholder interests.
• Expect volatility: Activist campaigns can make stocks jump or drop quickly—be ready for swings, especially in regional banks.
• Diversify your holdings: Don’t put all your money in one sector or a few banks; spread out your investments to lower risk.
• Follow the news: Stay updated on which banks are under activist pressure, as these stories can move markets fast.

For the full original report, see CNBC