Shares of U.S. regional banks took a hit on Monday, following the recent collapse of SVB Financial Group and Signature Bank, as fears of possible bank contagion spread. The news of fresh financing for First Republic Bank, which was able to meet withdrawal demands with the help of additional funding from JPMorgan Chase & Co, failed to assuage investors' concerns. The bank's executive chair, Jim Herbert, assured CNBC that the bank was fully serving the needs of its clients, but the stock continued to fall, with multiple trading halts and the share price down 67% at $28.05.
Regional banks in the US, such as Western Alliance, KeyCorp, Comerica Inc, Huntington Bancshares Inc, and PacWest Bancorp, experienced a decline in their share prices, leading to trading halts. The KBW regional banking index and the S&P 500 banking index also dropped by 5.4% and 6%, respectively. Christopher McGratty, who serves as the head of U.S. Bank Research at KBW investment bank, noted that the primary concern for the industry was a loss of confidence in the stability of deposits, which could lead to rapid movement in the market.
U.S. President Joe Biden made a commitment to address any potential banking crisis, and national regulators took emergency measures on Sunday. First Republic Bank secured additional funding through JPMorgan and the U.S. Federal Reserve, obtaining access to $70 billion in funds. Nonetheless, despite the cash infusion, Raymond James downgraded the bank's stock, indicating the risk of deposit outflows from panicked large depositors after the bank run at SVB.
First Republic was established in 1985 and reported $212 billion in assets and $176.4 billion in deposits at the end of 2022, according to its annual report. Bank of America noted that around 70% of the bank's deposits are not insured, which is higher than the median of 55% for medium-sized banks and the third-highest among the group, following Signature Bank and Silicon Valley Bank. Following the recent events, Bank of America lowered its price target on the bank's stock from $140 to $90.
The recent downturn in the banking industry, which comes after a series of interest rate hikes by the Federal Reserve over the past year, has resulted in a significant drop in yields on the 2-year Treasury note - the largest decline since the financial crisis in 2008. Art Hogan, who serves as the chief market strategist at B. Riley Wealth, commented that the market is currently experiencing the consequences of rapidly increasing interest rates and how it can impact the balance sheets of regional banks.
Art Hogan, the chief market strategist at B. Riley Wealth, explained that the recent decline in the banking sector can be attributed to the risk of increasing interest rates, which has caused the yields on the 2-year Treasury note to decrease significantly for the first time since the 2008 financial crisis. Hogan further noted that the damage to regional banks would vary on a case-by-case basis, as each bank has its own exposure to different parts of the market. Meanwhile, Brian Levitt, the global strategist at Invesco, highlighted that the market is currently focusing on smaller banks that specialize in lending, and after Silicon Valley Bank, investors are now turning their attention to First Republic Bank, which has significant exposure to coastal real estate markets.
The share prices of Bank of America Corp, Citigroup Inc, and Wells Fargo all declined amidst the banking crisis, while lenders in Asia and Europe also experienced sharp drops. The Federal Home Loan Banks (FHLB) in the U.S. is trying to raise approximately $64 billion by selling short-term notes to assist member financial institutions in making mortgages to consumers. This move is reported by Bloomberg News.
Regional banks in the US, such as Western Alliance, KeyCorp, Comerica Inc, Huntington Bancshares Inc, and PacWest Bancorp, experienced a decline in their share prices, leading to trading halts. The KBW regional banking index and the S&P 500 banking index also dropped by 5.4% and 6%, respectively. Christopher McGratty, who serves as the head of U.S. Bank Research at KBW investment bank, noted that the primary concern for the industry was a loss of confidence in the stability of deposits, which could lead to rapid movement in the market.
U.S. President Joe Biden made a commitment to address any potential banking crisis, and national regulators took emergency measures on Sunday. First Republic Bank secured additional funding through JPMorgan and the U.S. Federal Reserve, obtaining access to $70 billion in funds. Nonetheless, despite the cash infusion, Raymond James downgraded the bank's stock, indicating the risk of deposit outflows from panicked large depositors after the bank run at SVB.
First Republic was established in 1985 and reported $212 billion in assets and $176.4 billion in deposits at the end of 2022, according to its annual report. Bank of America noted that around 70% of the bank's deposits are not insured, which is higher than the median of 55% for medium-sized banks and the third-highest among the group, following Signature Bank and Silicon Valley Bank. Following the recent events, Bank of America lowered its price target on the bank's stock from $140 to $90.
The recent downturn in the banking industry, which comes after a series of interest rate hikes by the Federal Reserve over the past year, has resulted in a significant drop in yields on the 2-year Treasury note - the largest decline since the financial crisis in 2008. Art Hogan, who serves as the chief market strategist at B. Riley Wealth, commented that the market is currently experiencing the consequences of rapidly increasing interest rates and how it can impact the balance sheets of regional banks.
Art Hogan, the chief market strategist at B. Riley Wealth, explained that the recent decline in the banking sector can be attributed to the risk of increasing interest rates, which has caused the yields on the 2-year Treasury note to decrease significantly for the first time since the 2008 financial crisis. Hogan further noted that the damage to regional banks would vary on a case-by-case basis, as each bank has its own exposure to different parts of the market. Meanwhile, Brian Levitt, the global strategist at Invesco, highlighted that the market is currently focusing on smaller banks that specialize in lending, and after Silicon Valley Bank, investors are now turning their attention to First Republic Bank, which has significant exposure to coastal real estate markets.
The share prices of Bank of America Corp, Citigroup Inc, and Wells Fargo all declined amidst the banking crisis, while lenders in Asia and Europe also experienced sharp drops. The Federal Home Loan Banks (FHLB) in the U.S. is trying to raise approximately $64 billion by selling short-term notes to assist member financial institutions in making mortgages to consumers. This move is reported by Bloomberg News.
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