Investors skeptical of banking assurances
- Hope King, author of Axios Closer
Investors dumped shares of banks with large amounts of uninsured deposits on Monday in the aftermath of Silicon Valley Bank's collapse.
Why it matters: The steep selloff impacted regional banks including PacWest, First Republic, and Western Alliance, as well as Charles Schwab, despite this weekend's coordinated federal response and each firm's attempt to allay concerns.
Between the lines: Depositors have been assured by the White House and regulators that their money is safe, regardless of how much they parked and at which bank they parked it.
- Those promises should in theory eliminate the fear incentive for any speculative bank run.
- But shareholders — who are at risk of losing their bets — continued to batter the stocks of banks where they see potential risk, from industry concentration, to funding sources, to deposit mix.
What they're saying: “The good news is the Fed stepped in and took appropriate action,” Art Hogan, chief market strategist at B. Riley Wealth, tells Axios.
- And while that move was made in part to “stem the tide of emotional response” in the public, “muscle memory of the great financial crisis” prevents the message from settling in immediately, he says.
By the numbers: Some of today's hardest battered stocks were those of banks with the heaviest concentrations of deposits over the official FDIC-insured maximum of $250,000, the WSJ notes, citing data from filings.
- 68% of deposits at First Republic were uninsured at the end of last year, according to the WSJ report.
- 64% at Comerica and more than half at Zions, PacWest Bancorp and Western Alliance exceeded that threshold.
What to watch: A full review of all the regional banks and clues that they may now be in a similar balance sheet position as SVB.
- "We have a diversified deposit base ... [and] have taken numerous strategic steps over the past four quarters to improve the balance sheet," PacWest said in a statement Friday.
- “First Republic’s capital and liquidity positions are very strong,” bank executives said Sunday night.
The bottom line: Investor reaction today to the fallout of Silicon Valley Bank’s collapse is not necessarily an indication of what bank depositors are doing.
- “As a depositor, I know I’m safe," Hogan says.
- "As an investor, I don’t know that that’s the case because I have to trust that the management of that bank is keenly aware of how concentrated his risk is to any one industry.”
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