Finance: Local bank wobble worries investors

Finance


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Dan Primack said the roller coaster week for regional bank stocks shows the banking crisis is far from over. Axios. The forced sale of First Republic Bank, which collapsed earlier this month, did not reassure investors. The company’s shares fell 50% after Pacwest Bancorp said it was considering a potential sale. The deal was halted several times by reports that Phoenix-based Western Alliance was also seeking help. Shares of PacWest and Western rebounded 82% and 49%, respectively, last week, but shares of both banks, as well as Texas’ Comerica and Utah’s Zions Bancorp, fell again this week. Fed Chairman Jerome Powell tried to reassure markets by declaring the U.S. banking system to be “healthy and resilient.” But it sounded “like a sports team owner giving a coach a vote of confidence” and was never a good sign.

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Charles Gasparino said Wall Street didn’t buy Mr. Powell’s bromides. new york post. Depositors at regional banks are losing confidence, as it is said that the banking industry is a game of trust. “They’re running out of capital in banks and pushing them into bankruptcy because they don’t know what they’re backing up, including commercial real estate, which is getting worse and worse.” First Republic and JPMorgan Chase A shotgun marriage “did nothing to dispel concerns about the system,” said Amit Sel. new york times. Commercial real estate loans account for his quarter of the average bank’s assets. The delinquency rate for commercial mortgages was 2.61% in March and is “rising rapidly.” If it hits 10%, the “lower end of the range seen during the Great Recession,” it will result in losses of about $80 billion to $160 billion, which local banks can’t afford.

“The stock market is pretty panicked about these banks, but most depositors aren’t,” Matt Levin said. bloomberg. This is a case of the stock market overreacting to a worst-case scenario, something that the stock market does on a daily basis. The depositors who added $600 million in cash to the Western Alliance the day after the First Republic rescue may not be ready to run away at all. And that is why some short sellers say, “cause they will fail. “

Liz Hoffman said people should stop shorting bank stocks. semaphore. Regulators have in the past, like in the fall of 2008 and in March 2020, restricted short selling, which is essentially a bet on a company’s decline, due to concerns about market stability. “Short selling plays an important role,” he said, in a rational and well-functioning market. It puts the blame on companies, “but this is no longer a well-functioning market.” Julia Horowitz told CNN that betting on bank failures could be a self-fulfilling prophecy. She said that “customers see the bank’s stock price fall, think that the bank is in financial trouble, and withdraw their funds”, which could lead to bank failure. That is why this situation requires government intervention. Short selling limits would help. So would ensuring that the US protects all deposits regardless of size. That would buy time for financial markets to calm down.

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