Investors are flocking to these well capitalized regional banks after SVB's collapse, market analyst says

• KBW's RJ Grant say investors should seek out well capitalized banks for sizable returns in the long run.
• "Banks with strong deposit franchises are the ones that investors have been flocking to," he said.

Despite the turmoil caused by Silicon Valley Bank's collapse, high quality names in regional banking will still make for a good investment.

That's according to KBW Head of Equity Trading RJ Grant, who told CNBC that investors can expect sizable earnings in the medium and long term if they focus on well capitalized regional banks.

"Citizens Financial is a big one, [US Bank], Regions Financial — so banks with strong deposit franchises are the ones that investors have been flocking to," he said.

While those looking to enter the market should be wary of banks that are only now looking to raise capital, he noted that investors have already begun approaching things more cautiously, such as by seeking out firms with more stable deposits.

"The banks that have kind of cleaner, more simple operations and less flighty deposits — whether it's in venture tech, crypto — those are the banks that we really recommend investors going to during this very uncertain time," he said.

Acknowledging banking's "near-term capitulation" in the aftermath of SVB's sudden collapse on Friday, Grant has seen a reversal in recent days, as investors returned to take advantage of the valuation reset.

SVB, a regional bank in California, took investors by surprise last week by undergoing a historic stock selloff after it revealed steep losses on its bond holdings. The fiasco sent bank stocks plummeting and sparked the biggest bank failure since 2008, with the FDIC taking over SVB just days after its initial issues were revealed.

While shares in regional banks continued to plunge by double digits on Monday, a reversal was taking shape Tuesday.

Regional banks such as First Republic and PacWest watched as their stock prices climb by over 40% on Tuesday.

Still, investors should remain alert to governmental action — such as new requirements on capital or deposit protections — as it could have further implications on markets, Grant said.