Regional Bank Buybacks: 5 Institutions Making Big Moves

Key Points

• There is an interesting trend among regional banks recently: the announcement of sizable buyback programs.
• The programs give these firms the capacity to repurchase between 15% and 5% of their shares. 
• Examining the $26 billion Fifth Third Bancorp helps shed light on why these financial institutions are feeling confident about their future.

A slew of regional banks just announced substantial new share buyback authorizations. Regional banks are mid-sized to small financial institutions that tend to serve a particular part of the country. The buyback announcements coming from these financial companies signal a level of industry-wide confidence.

This use of cash ultimately suggests that these firms believe they are well-capitalized and are in a strong position to use their excess funds to return capital.

Fifth Third Bancorp NASDAQ: FITB illustrates this. The company recently announced a buyback program under which it can repurchase up to 100 million shares. This is a huge buyback program equating to approximately 15% of the firm's outstanding share count as of June 20.

After diving into the details surrounding Fifth Third, this analysis will look at four other regional bank stocks that also announced hefty buyback programs. All buyback capacity data use share prices as of the June 20 close.

FITB: CET1 Ratio and Bond Portfolio Provide Buyback Confidence

One way to measure a bank’s financial health is by looking at its Common Equity Tier 1 (CET1) capital ratio. This essentially measures the amount of high-quality capital it has in relation to the riskiness of its loans. In the event of loan defaults, this capital helps the firm absorb losses.

Banks are required by regulators to keep their CET1 ratios above a certain level. Fifth Third Bancorp has a CET1 ratio requirement of approximately 7.7%. However, its actual CET1 ratio stands at nearly 10.5%. This means that the firm more than meets its capital requirements, putting it in a strong position to buy back shares.

At the Morgan Stanley US Financials conference on June 10, Fifth Third said it feels “very, very comfortable” with its 10.5% CET1 ratio. The company is also confident in its bond portfolio, which it is largely secure in holding to maturity. This protects against losses if interest rates rise.

Overall, the firm’s bond portfolio generates around $1 billion in cash flow per quarter. These factors help give the company the confidence it needs to buy back shares. The conference host suggested the firm is targeting $400 million to $500 million in buybacks over the rest of the year.

CFG & CATY: +$1 Billion Banks Announce Significant Buyback Programs

Another regional bank announcing a large share buyback program is Citizens Financial Group NYSE: CFG. Worth approximately $18 billion, it is the second-largest stock on this list behind Fifth Third.

On June 13, the company announced that it had increased its share buyback authorization to $1.5 billion.

This accounts for a very substantial 8.3% of the company’s market capitalization.

The company’s CET1 ratio sits at 10.6%. The company notes that the buyback authorization “reflects confidence in our ability to deliver strong financial performance."

With this buyback in place, Citizens is positioning itself as one of the more aggressive capital return stories in the space.

Cathay General Bancorp NASDAQ: CATY also announced a new $150 million share repurchase program on June 4, equating to around 5% of its $3 billion market cap.

This comes just a few months after the company completed a $125 million buyback program.

The company completed that program in only nine months, suggesting it could also make quick work of this one. Cathay’s CET1 ratio is nearly 13.6%, giving it the capital strength to support continued shareholder returns.

With a strong balance sheet and a clear commitment to buybacks, Cathay is signaling confidence in its valuation and long-term strategy.

TCBX & RBB: Sub $1 Billion Banks with over 5% Buyback Capacity

The second-smallest player in this group is Third Coast Bancshares NASDAQ: TCBX. On June 17, the company announced a new $30 million buyback authorization.

This may sound small in dollar figures, but it equates to approximately 7.1% of the firm’s $424 million market cap.

Additionally, the firm placed a relatively close expiration date on the program. It only lasts until May 22, 2026, meaning the firm could use all of this buyback capacity in less than a year’s time.

The company’s CET1 ratio is 8.7%, improving significantly from 8% a year ago.

Last up is RBB Bancorp NASDAQ: RBB. On May 29, the company announced an $18 million buyback program, equal to around 6.2% of its $291 million market cap.

This program lasts through June 30, 2026, signaling that the company will utilize its entire capacity in just over a year. Its CET1 ratio is approximately 17.9%.

These recent and substantial buyback programs suggest that these regional banks are confident in their financial standing now and going forward.

Notably, four of these firms have indicated dividend yields of 3% or more, adding significance to their overall return of capital strategies. Third Coast does not pay dividends.