Traders work on the floor of the New York Stock Exchange.
Brendan McDiarmid | Reuters
After a few days of turmoil as the fate of an ailing lender looms First Republic Veteran Bank Analyst Finally Decided Christopher McGratie I waited for him to calm down.
Early Tuesday morning, more than 24 hours after U.S. regulators seized First Republic JP Morgan Chase To take over most of its assets, McGratty went to see clients in Manhattan. But minutes after the normal opening of trading, his KBW regional bank shares, which he covers, began to plummet.
McGratti said in a telephone interview, “I thought, ‘It’s a good day to catch up, it’s kind of an orderly day.'” was red.”
The plunge in regional banks, sparked by the March failure of Silicon Valley Bank, resumed on Tuesday, catching Wall Street analysts and investors by surprise. The First Republic’s orderly resolution by the country’s largest lenders has quelled, not rekindled, concerns about the state of America’s banking system.
sharp drop— pak west Shares fell 28% on Tuesday to a record low. western alliance lost 15% — in the absence of new news, banking experts were looking into why this happened.
Concerns about uninsured deposits, concerns about commercial real estate and upcoming regulations could all be triggers, it said.
Others pointed to pressure from short-selling.that is Peter OrzagCEO of Financial Advisory Lazard The person who conducted the rescue operation on behalf of the First Republic told CNBC’s Sarah Aisen on Tuesday.
“People are looking for answers, but no one has good answers.
march madness
PacWest and Western Alliance recently released their first quarter results and updated numbers through mid-April, which initially allayed investor concerns about deposit outflows. But the present moment, he said, is more about human emotions than how banks are usually valued at times.
‘Market looking for possible next domino’ falls after SVB seizure Signature and First Republic, McGratty said.
“We’re in a very similar situation in March where we’re trading stocks based on fear and emotion rather than fundamentals,” he added.
This does not make the medium-sized bank dangerous. According to analysts such as McGratty and his Evercore ISI’s John Pancari, the pressure on bank stocks could cause customers to withdraw their deposits again.
“While we are confident in the bank’s liquidity and capital levels from the first quarter onwards, we ignore the risk that market pressure on bank share valuations could fuel self-fulfilling prophecies,” Pankari said. I cannot do it,” he said.
PacWest and Western Alliance stocks rebounded slightly on Wednesday. The KBW Regional Bank Index also rose.
more fragile
Events in March showed that banks may fail before anyone else.
Fear fueled by digital banking tools and social media Deposit flights at banks, including SVB, where customers attempted to withdraw over $140 billion in deposits in two days.
So McGratty, who says the scars of the 2008 financial crisis are still lingering, says the current turmoil is, in at least one important way, more terrifying than it was 15 years ago. .
Bad loans, the root cause of previous crises, could take months to bankrupt banks, he said.
But a customer-driven deposit bank run “can kill you within 36 hours, as happened with SVB,” he said. “It shows how fragile everything can be.”
