48% of Americans fear for their savings. The fear is not justified, because in the US deposits are, in theory, guaranteed by the State up to $250,000, and in practice, unlimited. But it is a sign of the panic that exists with the crisis of the country’s regional banks. In fact, it is a figure slightly higher than that reached in September 2008, after the bankruptcy of Lehman Brothers, the largest liquidation of a company in history. It is actually possible that the fear is even greater, because the survey was carried out by the polling company Gallup two weeks ago, when the fourteenth largest bank in the country, First Republic, had not yet had to be intervened by the State and later sold to JP Morgan.
First Republic is the third bank to fail in the US in a month and a half. But it doesn’t look like it will be the last. The KBW NASDAQ Regional Banking Index fell 3.33% today at mid-session, amid widespread fears that there will be more collapses of regional banking entities in the country. Because the US is a country with a fragmented banking sector in which, despite the growing concentration, there are more than 4,000 entities and not a single one – not even giants like JP Morgan or Bank of America – has a presence in the entire country.
So far this year, the KBW NASDAQ Regional Banking Index has fallen 31%. And yesterday it did so by 6% at the opening of the session. That was due to the flurry of rumors and news about three banks: Los Angeles-based PacWest; Western Alliance, in Phoenix (Arizona); and First Horizon, in Tennessee. Each one with assets that fluctuated before the crisis between 40,000 and 80,000 million euros, have seen their price plummet, although for different reasons.
First Horizon shares lost 40% after the bank’s management agreed with Canada’s Dominion Bank to abandon the operation by virtue of which the latter entity acquired the Tennessee bank. Those of Western Alliance fell by 62% with the news in the Financial Times newspaper that it was looking for a buyer to ‘rescue’ it. When the bank “categorically” denied the news, the shares rose, although with two hours to go they were still 31% below their opening.
The most desperate case was that of PacWest, which has lost 85% of its value on the stock market so far this year, and only yesterday it lost 43%. According to the Bloomberg news agency, it is looking for a buyer, although the institution’s management affirms that its deposits are growing and that the selling pressure is just a “contagion effect” derived more from the psychology of the market than from the company’s numbers.
Both the Federal Reserve – on Wednesday – and the European Central Bank – today Thursday – have insisted that the balance sheets of financial institutions are solid. But not all the market seems to believe them. Most of the problems in the US have been concentrated in banks that have relatively similar characteristics: they are based on the West Coast, which has experienced an economic ‘boom’ thanks to zero interest rates that have skyrocketed housing prices, and generated a segment of very wealthy clients that the entities have pampered. Now, with the rise in inflation, first, and interest rates, later, the disposable income of customers has collapsed, the price of housing has frozen or even fallen and the ‘boom’ of the technological it has stopped dead, with which delinquency has grown. As if that weren’t enough, some of these banks hold large portfolios of Treasuries, theoretically the safest asset on Earth, but whose value has fallen due to rising rates.
According to the criteria of The Trust Project
