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After PNC's BBVA Deal, Oppenheimer Analyst Says Regional Bank Breakout Is Bullish for Entire Market

Juan Medina | Reuters

PNC Financial climbed on Monday after agreeing to buy the U.S. unit of Spanish banking company BBVA for $11.6 billion in cash.

The rest of the regional banks surged, too. The KRE banking ETF ended the session more than 4% higher.

Ari Wald, head of technical analysis at Oppenheimer, sees the outperformance as a positive for the rest of the market.

"The regional and the large banks are emblematic of the bear market in key risk areas that were suffered between 2018 and 2020 and are now reversing higher. So I think for the market as a whole, this is very bullish. It represents a market now firing on all cylinders," Wald told CNBC's "Trading Nation" on Monday.

After a 21% rise in three months, Wald added that the regional banks may need to cool off before resuming the rally.

"The train has definitely left the station on this one. [It's] dealing with some near-term overbought conditions. With that said, we have a market weight position on the industry and think it can continue to rally with this broad market breakaway," he said.

He highlighted $44 as a level of support and upside as high as $55, the level the KRE ETF traded in February before the Covid pandemic market losses. The shares closed Monday at $49.16.  

As for PNC's deal, Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, said the acquisition should prove beneficial to the company, particularly after it sold its stake in asset manager BlackRock earlier this year.  

"If you look at where they unloaded their shares of BlackRock, they were at very good valuations. And while they're giving up massive margins which come with BlackRock which are 40% margins, they're still buying into a high-margin business, and one that is complimentary to their business. It opens up Texas, Alabama, Florida, Colorado, California, New Mexico and Arizona so this is a really interesting buy for them," Sanchez said during the same "Trading Nation" segment.

PNC sold its position in BlackRock for roughly $14 billion in May. It used the proceeds of the sale to finance its BBVA purchase. The deal is expected to close in mid-2021.

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