2023-05-08 08:21:00
Presidente de Bursamétrica
After another stormy week for local US banks, where First Republic Bank had to be bailed out by regulators and sold its assets to JPMorgan & Chase following suffering the withdrawal of more than $100 billion of deposits, other banks PacWest, Western Alliance, First Horizon, Zions Bancorp, and Metropolitan Bank have suffered the ravages of this crisis.
Pac West is a holding Bank of Beverly Hills, Los Angeles, California, owner of Pacific Western Bank, which provides commercial banking services, including real estate, construction, and commercial loans, and deposit and treasury management services to small and medium-sized businesses, with assets of regarding $44,000. million dollars and 1,850 employees, with offices in California, Colorado and North Carolina. PacWest Bancorp was named America’s Best Bank in 2017 by Forbes.
Western Alliance Bancorporation es un holding regional bank headquartered in Phoenix, Arizona. It is on the list of the largest banks in the US and ranks 13th on the list Forbes one of the best banks in that country. It has assets of regarding $75 billion and 3,400 employees. It has subsidiaries in Arizona, Nevada and California.
First Horizon Corporation is a local bank in Memphis, Tennessee, with total assets of regarding $90 billion and 7,600 employees, has branches in the southeastern United States, making it the fourth largest local bank. Toronto-Dominion Bank announced last February that it would buy First Horizon bank, but last Thursday it was announced that the merger was canceled due to regulatory issues, sending First Horizon’s share price down 40 percent, and a massive withdrawal of deposits in that bank.
Zions Bancorp, a small bank with a $3.6 billion capitalization value, saw a 20 percent drop while Metropolitan Bank, a very small local bank with a market capitalization of regarding $200 million, fell more 25 percent in a single session last Thursday.
The generic pattern of behavior in this crisis of regional banks has been that some exogenous element or some particular event unleashes a massive sale of the institution’s shares, which then causes a run on deposits. Banks are having to look for desperate solutions to this circumstance, just as happened in Silicon Valley in its assets that have long-term Treasury bonds, the bank has to go out and sell them with a significant loss, since, by increasing interest rates interest rate, bond prices fall in value. The loss made or to be made, on several occasions can erase the capital of the banks.
Zions Bancorp, a bank with a value of 3.6 billion dollars in the Stock Market, has fallen almost 20 percent in the face of this new onslaught of the financial storm and has closed with a decrease of 12 percent. Metropolitan Bank, a small bank with a market capitalization of around $200 million, has been falling more than 25 percent, but then recouped most of the losses, ending down 6.0 percent.
The scenario is further complicated by the rate increases that the Federal Reserve Bank has had to carry out, and the risk that is still on hold with the non-approval by the Republican Party of an increase in the debt ceiling. and in the budget of expenses, by the North American Congress, which was already warned by Janet Yellen, Treasury Secretary, that it might result in a colossal disaster in the world, since the Government of the United States might end up incurring a massive payment default and default of your debt.
For the time being, and despite the fact that the employment figures for April, which we learned last Friday, still present robust job creation of 253,000 new jobs, with high salary inflation, above 4.0 percent per year, and a decline in the unemployment rate to 3.4 percent, which is considered “Full Employment,” the Federal Reserve statement removed the magic words that warned of possible future increases in the Federal Funds Rate target, which opened the door to a pause in the bullish cycle.
There are more and more indicators that point to a recession and not a soft landing as suggested by Jerome Powell, president of the Fed. What is a fact is that this banking crisis is causing an immediate credit crunch, which may precipitate the recession.
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