Regional bank stocks declined on Tuesday following the collapse of First Republic Bank the day prior, the second-largest bank failure in U.S. history and the third major lender to fall this year.
PacWest Bancorp and Western Alliance Bancorporation shares were down 20% late Tuesday, while shares of Zions Bancorporation, Comerica Incorporated and KeyCorp declined about 10%. Federal regulators took ownership of the regional bank First Republic and sold it to banking giant JPMorgan Chase on Monday; CEO Jamie Dimon expressed optimism about the banking sector, stating that he believed a significant portion of the banking crisis has ended.
“There are only so many banks that were offsides this way,” Dimon said in a call following the takeover announcement, according to CNBC. “There may be another smaller one, but this pretty much resolves them all. This part of the crisis is over.” (RELATED: ‘The US Economy Is Unwell’: Wall Street Bigwigs Pour Cold Water On Biden’s Economic Optimism)
WASHINGTON, DC – SEPTEMBER 22: JPMorgan Chase & Co CEO Jamie Dimon arrives for a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill September 22, 2022 in Washington, DC. The committee held the hearing for annual oversight of the nation’s largest banks. (Photo by Drew Angerer/Getty Images)
Rising interest rates can pose a challenge for regional banks as it makes it more expensive to retain deposits and reduces the value of particular bonds and loans, according to CNBC. These concerns were a contributing factor to the deposit run on Silicon Valley Bank (SVB) in March, which quickly spread to Signature Bank, resulting in the collapse of both financial institutions.
President Joe Biden said the FDIC and JPMorgan Chase’s agreement will “make sure the banking system is safe and sound,” in remarks delivered at a National Small Business Week event on Monday. “That includes protecting small businesses across the country who need to make payroll for workers and their small businesses,” he added.
America’s 25 largest banks received $120 billion in deposits following the collapse and bailouts of SVB and Signature in March, while deposits at smaller banks fell by $108 billion, according to The Wall Street Journal.
The regional banks will be a topic of concern this week when the Federal Reserve Board meets to decide whether or not to continue to raise interest rates. Despite the regional bank crisis, “I am still anticipating the Fed hiking rates,” E.J. Antoni, research fellow for Regional Economics at the Heritage Foundation’s Center for Data Analysis, told the Daily Caller News Foundation.
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