BREAKING: Regional Bank Stocks In The U.S Are Getting Hammered With Many Names Down +30% — This Banking Crisis Isn’t Over Yet🚨
Unfortunately this regional banking crisis in the United States is gathering momentum after First Republic Bank’s collapse over the weekend.
Remember that this all started with Silicon Valley Bank just weeks ago.
A failure of regulation and poor internal risk-management which triggered large deposit outflows.
Higher rates are now truely being felt by the real economy, with regional banks suffering from large unrealised losses in fixed income portfolio’s and subsequent stock market hits that is exacerbating deposits outflows.
Regional banks are suffering losses on HTM portfolio’s but can’t raise deposit rates as that would further hit profitability and lead to more outflows.
Now hundreds of billlions of deposits have been flowing from regional banks to money market funds and larger/safer financial institutions.
How this regional banking crisis stops is currently unclear and so is the end-state…
Here are some of the regional banking stocks are down are down big today:
PacWest: -35%
Western Alliance: -30%
Metropolitan Bank : -27%
HomeStreet: -23%
Zions Bank: -15%
Citizens Financial: -12%
Here is a very simplistic way that this will ripple through the economy (there are many other implications):
Regional banks collapse —> Banks tighten lending standards —> Credit becomes more expensive —> Firms can’t get finance at all or at higher rates —> Firms lay-off employees —> Consumers can’t pay their mortgage —> Consumers pull back on spending —> Economy slows —> Banks further tighten lending standards —> Deliquencies —> Forced sales —> More unemployment —> Even higher borrowing costs —> Economy slows further.
The Fed is expected to raise interest rates AGAIN tomorrow by 25bps.
Meanwhile in congress, lawmakers have urged Powell to stop - this just got political.
Over to you Mr Powell, it might be time for a pause.
Strap in.
