With major U.S. banks set to begin reporting third-quarter results next week, the number of financial-sector insiders buying shares in their own companies has fallen to its lowest level in nearly 23 years. VerityData counted 298 financial employees who made at least one purchase during the quarter, below the previous low of 302 in the third quarter of 2024 and the lowest since its records began in 2004.
The decline comes as Wall Street trading remains active and this year’s large IPOs have generated substantial revenue. Insider purchases are one gauge investors use to assess how executives view their companies’ valuations and prospects, but the figures alone do not determine banks’ results or future share prices.
Financial-sector buying hits a record low
Ben Silverman, VerityData’s head of research, said 298 financial-sector insiders made at least one purchase in the third quarter. The data covers more than 3,000 financial services companies, including large banks, asset managers and insurers.
Insider buying also declined across the broader market. There were 1,290 buyers in the third quarter, down 18% from 1,580 in the second quarter. Financial-sector insider sales outnumbered purchases, but remained close to typical levels.
Sales can be difficult to interpret: executives may sell shares to cover taxes, diversify their holdings or carry out prearranged trading plans. A single sale does not necessarily signal a lower view of a company. Purchases made voluntarily by executives are often more readily seen by investors as a sign of confidence.
Experts differ on what the decline signals
Jesse Fried, a Harvard Law School professor, said fewer financial executives buying their own companies’ shares could be a bearish signal for the sector. He said insider buying has often been associated with companies going on to outperform the broader market.
Silverman offered another explanation: the decline may reflect greater caution about valuations. If executives see a wide gap between a stock’s price and what they consider fair value, they may hold off rather than buy at a price they consider too high.
Nejat Seyhun, a finance professor at the University of Michigan’s Ross School of Business, said the data has limited power to predict bank-stock performance. Insider trading can sometimes be associated with future returns across the market, he said, but banks are not an area where the measure is especially useful.
Bank performance depends heavily on macroeconomic factors such as monetary policy, interest rates and inflation. Those variables are often beyond executives’ ability to anticipate, making it difficult to forecast share performance based on company-specific information alone.
Bank earnings will test market expectations
Investors are now turning to third-quarter results from major banks. JPMorgan Chase and Goldman Sachs are scheduled to report on October 13, followed by Morgan Stanley on October 14.
Bank profits and revenue have generally grown this year, but the IPO market has recently slowed. Oura and Bamboo Insurance postponed their listing plans last month. The Federal Reserve also raised interest rates during the period, a move that could weigh on corporate financing and dealmaking.
Large companies are also raising substantial loans to fund artificial intelligence projects. If borrowers’ ability to repay weakens, banks and other Wall Street firms could face greater credit risk and pressure on asset quality. The market is still assessing what this financing demand means for banks’ revenue and risk exposure.
Bank stocks have recently lagged the broader market. As of October 7, the KBW Bank Index was down nearly 11% over the previous month, while the S&P 500 had gained 1%. The bank index was still up about 3% year to date. Ahead of earnings, the record-low insider buying and recent underperformance offer additional context for investors, while results, loan quality, interest-rate sensitivity and management guidance will provide further details.