“Shark Tank”/ABC
- “Shark Tank” star Kevin O’Leary won’t invest in banks, expecting tighter regulation to kill profits.
- Although the crisis began with regional banks, O’Leary sees stricter policies hitting bigger lenders.
- “If you thought putting your money into bank stocks was a good idea, you should change your mind this morning — forever.”
“Shark Tank” star Kevin O’Leary said he would not invest in bank stocks in the aftermath of the Silicon Valley Bank failure last week.
The chairman of O’Leary Ventures told CNN on Monday that the federal rescue of depositors at SVB and Signature Bank means President Joe Biden has effectively “nationalized” the banking industry.
“You have zero risk and that has consequences,” O’Leary said. “There’s no such thing as a free lunch. And this is going to be very expensive for shareholders of banks long term. I would never put my money into a bank stock ever again.”
Later that day, Biden committed to stricter oversight and said SVB’s collapse was helped by the Trump administration’s easing of the Dodd-Frank law’s rules on smaller banks.
But O’Leary views tighter restrictions as detrimental to banking profits, creating an environment of low-growth and a permanent end to what investors had grown accustomed to.
“That’s the way we should look at banking going forward. Nothing more than highly regulated utilities,” he said. “And that has profound impacts for you as an investor. If you thought putting your money into bank stocks was a good idea, you should change your mind this morning — forever. Should you own bank bonds? Never. You’re taught that lesson over the weekend.”
After SVB suffered its sudden demise on Friday, bank stocks fell broadly and have yet to recover. Shares of regional banks in particular continued to crater on Monday, as investors feared SVB was not the only one with financial missteps.
Although SVB contagion is hitting regional bank stocks hard now, O’Leary sees new financial restrictions stretching through every level of the industry, including banking giants, which could grow even bigger if the sector consolidates.
“They’re going to be even more regulated as they become more concentrated and far less profitable,” he said. “This really does make you think about owning bank stocks long-term. I think they’ll be underperforming the index for decades to come.”
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