(Reuters) – Shares of Baquest Bancorp (PACW.O) led declines in US regional lenders on Tuesday as investors feared the current banking crisis could worsen.
PacWest stock fell 5%, a day after the Los Angeles-based bank’s decision to cut its quarterly profit failed to allay concerns about its financial stability.
The KBW Banking Regional Index (.KRX) was down 1.5% and was hovering near the 30-month low hit last week following the collapse of First Republic Bank and PacWest’s decision to explore strategic options.
PacWest and Western Alliance, which have been at the center of regional bank sell-offs, saw the largest drop in deposits in the first quarter after First Republic, according to data from S&P Global Market Intelligence.
“The deposit journey is a top priority for investors, as the collapse of Silicon Valley, Signature Bank, and First Republic coincided with the mass deposit journey,” said Alexander Yocum, equity analyst at CFRA Research.
His view of regional banks is neutral as deflationary valuations, relatively strong capital levels and resilient credit quality offset concerns about deposit inflows, slowing loan growth and heavy exposure to distressed office properties.
Adding to the banking woes, US companies of all sizes were showing less demand for credit in the first quarter than they did three months ago, according to a Federal Reserve survey, among the first measures of sentiment across the sector since the recent series of bank failures.
However, the tightening of credit conditions for American businesses and households in the first few months of the year was likely due to the effect of higher interest rates from the credit cliff-like decline some feared after the March collapse of Silicon Valley’s bank, the Federal Reserve. Show quarterly survey.
“We expect some credit erosion as the year progresses, but we also believe that banks have visibility into the outlook and can manage any credit stress that emerges,” John Arvstrom, analyst at RBC Capital Markets, said in a note.
Western Alliance (WAL.N) fell 2.6%, while Clients Bancorp (CUBI.N) and First Horizon Corp (FHN.N) fell 4.7% and 3.4%, respectively, with Arfstrom noting the decline in banking stocks overall. may be achieved. Their reviews are attractive.
Wall Street executives and bank analysts last week called on regulators to quickly provide more protection for bank deposits and consider other points of support, arguing that only intervention could stop the crisis.
Since the start of first-quarter earnings, mid-bank stocks have lost 9% and are down an average of 29% since March 8 when the Silicon Valley bank disclosed a deposit drain, according to Morgan Stanley analyst Manan Gosalia.
He said the market had overreacted as there was no sign of further deposit outflows, although the cost of funds, loan growth and regulation could weigh on regional lenders.
Additional reporting by Medha Singh in Bengaluru, with additional reporting by Bansari Mayur Kamdar; Editing by Aaron Kuyor
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