In Market Slump, Over-the-Counters in the Pink
Pavlenko-Lutton, Laura, American Banker
Though most bank stocks have been battered by recent market gyrations, over-the-counter stocks have been largely unaffected, according to a new study by SNL Securities.
An index of about 200 bank stocks that trade over the counter posted a 15.46% price increase from Jan. 1 through Sept. 17, while an index of exchange-traded bank stocks fell 9.75%. And since bank stocks hit their peak July 20, SNL's Pink Bank Index has dropped only 3.83%, while exchange- traded banks have lost nearly one-quarter of their value.
Companies whose shares trade over the counter, known as "pink companies," are typically smaller and have far fewer investors than concerns whose stock is listed on Nasdaq or another national exchange. The average bank share trades 28 times more frequently than does a share of $86 million-asset Progressive Bancorp of Pekin, Ill.
Trading shares over the counter has pros and cons. On the pro side, pink banks seem to be sheltered-at least at the outset-from rapid market downturns.
Alan Boughton, director of bank research for SNL Securities, said the thinly traded bank stocks have proved a safe haven for investors during times of uncertainty.
"By investing in these smaller, less-liquid stocks, you're somewhat hedged against a downturn in the markets," he said.
But pink banks' stock prices may not appreciate as quickly as exchange- traded companies be-cause of less-frequent trading. …