by top line
The second- and third-biggest bank failures in U.S. history shook investor confidence in tens of billions of dollars worth of bank stocks on Monday as contagion fears from the collapses of Silicon Valley Bank and Signature Bank spread across the industry and regionally Banks hit particularly hard.
The dramatic collapse of Silicon Valley Bank impacted other bank stocks.
Important facts
The 10 largest bank stocks in the US lost $76 billion in market cap on Monday, driven by Charles Schwab and Truist Financials 12% and 17% nosedives, respectively.
The grouping has lost $187 billion in market value since Wednesday, the last trading session before the Silicon Valley Bank breakup dragged the broader market lower.
Though each of these stocks slipped Monday, the impact was far greater for smaller bank stocks, as shares in regional banks First Republic and Western Alliance fell more than 50% or more on Monday after trading was suspended multiple times due to volatility.
In a note Monday to clients assessing the impact of the current crisis on the market, Bank of America analyst Ebrahim Poonawala cut price targets for 24 regional banks by an average of 24%, citing potentially higher compliance costs for companies in the face of more intensive regulatory scrutiny.
Big number
24. That’s how many of the S&P’s 25 worst performers on Monday were financial stocks, according to FactSet data.
Surprising fact
The bank losses briefly caused the S&P 500 to turn negative year-to-date, erasing an earlier rally of nearly 10%. The index rebounded 0.2% on Monday despite the banking crisis, while the Dow Jones Industrial Average and the tech-heavy Nasdaq jumped 0.1% and 0.8%.
against
“We believe some of the recent sell-off has been overdone at banks — particularly at select universal banks that remain well capitalized and sufficiently liquid to continue serving clients,” wrote Solita Marcelli, UBS Global Wealth’s Chief Americas Investment Officer Management a Monday note.
key background
The California Department of Financial Protection and Innovation shut down Silicon Valley Bank on Friday after the institution failed to honor withdrawal requests. The federal government pounced on Sunday to guarantee all personal and corporate depositors at the California bank would get their money back, a move deemed necessary by some to prevent a broader collapse of the banking industry and by others as yet another government parachute for a failing company. President Joe Biden said Monday he will urge lawmakers to tighten federal banking regulation after the two high-profile failures.
Further reading
Biggest banking collapse since the Great Recession sparks ‘overblown’ contagion fears – but big lingering risks remain (forbes)
Dow plunges nearly 1,500 points in worst week since June as bank stocks collapse (forbes)
Biden says bailing out Silicon Valley bank helped economy ‘breathe easier’ – but not all pundits agree (forbes)
