2023-05-02 21:38:11
Regional bank PacWest, suspended from trading several times for volatility, plunged 28% while Western Alliance fell 15%.
Zions ended down 11%, KeyCorp and East West 9%.
The big banks were not immune, with JPMorgan Chase losing 1.6%, Bank of America 3%, Citigroup 2.7% and Wells Fargo 3.8%.
“It is obvious that the concerns are reborn even following the takeover operation of First Republic, it is getting worse”, judge Karl Haeling of the LBBW bank.
“The market is telling us that it is chasing other banks,” he warns, interviewed by AFP.
The American authorities took control of First Republic on Monday and immediately sold the vast majority of it to JPMorgan Chase, thus enacting the third bankruptcy of a bank in a few weeks, following Silicon Valley Bank and Signature Bank in mid-March.
This operation “will help stabilize the system”, repeated several times Jamie Dimon, the boss of JPMorgan, on Monday.
Especially since the financial results published since mid-April by several regional banks have shown that following a real panic in mid-March, the flight of deposits had stabilized.
But the banks most affected on the stock market on Tuesday are those whose deposits have melted the most and are therefore “the most vulnerable”, underlines Ryan Nash, analyst at Goldman Sachs, during a press briefing on the state of the banking sector. Tuesday.
“During the financial crisis (of 2007-2009), when the situation of a bank was resolved (by a bankruptcy or a takeover, editor’s note), the market tended to seek the next weak link”, he recalls. . “That’s what’s happening right now.”
“Change the game”
Furthermore, the fact that the authorities did not invoke a systemic risk exception to protect all deposits when they took over First Republic, as they had done for SVB and Signature, “shows that regulators are willing to let a bank fail or be taken over by a bigger bank,” he said.
However, the headlines on phenomena that might weigh on economic growth are multiplying, whether it is the debate on the debt ceiling – which might be reached in early June if Democrats and Republicans do not reach an agreement – , the American central bank (Fed), which continues to raise its rates to fight once morest inflation, or the difficulties of the commercial real estate sector, financed for the most part by small and medium-sized banks.
Under these conditions, “the market thinks that the sector might have to consolidate in the long term” and that the authorities would not oppose it, which does not bode well for regional banks, advances Ryan Nash .
“The Fed should view ‘regional banks’ stock market difficulties’ as a game-changing event,” says LBBW’s Karl Haeling.
The central bank so far seemed to view failed banks as “isolated examples of mismanagement”, he said.
“But it goes beyond” and the Fed “cannot continue to be strict in its communication” on Wednesday when it announces its monetary decision and the follow-up it intends to give, he believes.
For Alexander Yokum of the CFRA firm, the three recent bankruptcies also have a direct cost for the banking sector, which finances through its contributions the deposit insurance fund managed by the FDIC agency.
The latter estimates that the failures of SVB, First Republic and Signature should amount to approximately 35.5 billion dollars.
Bailing out the fund should affect profits in the banking sector by 14% over one year, advances Alexander Yokum.
1683068995
#Republic #regional #banks #remain #pressure #Wall #Street
