All articles tagged with #deposit outflows
The GENIUS Act, enacted in July, is expected to lead to significant deposit withdrawals from traditional banks as stablecoin yields become more attractive, potentially causing a $6.6 trillion shift and challenging the banking sector's profitability, with big tech companies exploring stablecoin issuance to capitalize on this trend.
S&P Global Ratings has downgraded five regional US banks and signaled a negative outlook for others due to the challenging lending environment. The downgraded banks include KeyCorp, Comerica Inc., Valley National Bancorp, UMB Financial Corp., and Associated Banc-Corp. This follows similar downgrades by Moody's two weeks ago. Regional banks have been facing higher interest rates on deposits and struggling to prevent deposit outflows, impacting their profitability. S&P cited factors such as declining deposits and a high proportion of commercial and uninsured deposits as reasons for the downgrades.
Deposit withdrawals from US banks following the collapse of Silicon Valley Bank were concentrated in around 30 "super-regional" institutions in the $50 billion to $250 billion range, similar to SVB, New York Fed researchers concluded in a newly released study. Deposits among thousands of "community and smaller regional banks... were relatively stable by comparison" during March, the researchers found, with the largest, systemically important firms receiving the deposits that left the super-regional group. The report's release coincided with the FDIC announcing on Thursday its plan for replenishing its deposit insurance fund, which absorbed at least $16 billion of losses from the recent failures.
Deposit withdrawals from US banks after the collapse of Silicon Valley Bank were concentrated in around 30 "super-regional" institutions in the $50 billion to $250 billion range, similar to SVB, according to a study by the New York Fed. Deposits among thousands of "community and smaller regional banks... were relatively stable by comparison" during March, with the largest, systemically important firms receiving the deposits that left the super-regional group. Smaller banks were relatively unaffected, and the high level of uninsured deposits at SVB was a factor in its collapse.
PacWest Bancorp's shares slumped 25% premarket as the bank pledged additional assets as collateral to increase its borrowing capacity under the US Federal Reserve's discount window and said it had $15 billion of immediately available liquidity. The lender pledged an additional $5.1 billion of its loans to the central bank on Wednesday, which PacWest said resulted in an additional borrowing capacity of $3.9 billion. The bank pledged additional assets as collateral for borrowings to increase its liquidity position for potential deposit outflows.
A Federal Reserve report has shown that banks have tightened lending standards for households and businesses, potentially posing a threat to US economic growth. The report also revealed that banks expect troubles to persist over the next year, largely due to diminished expectations for economic growth, fears over deposit outflows, and reduced risk tolerance. The survey was being closely watched on Wall Street to gauge the fallout from troubles in the banking industry that accelerated in early March.
Regional bank stocks rebounded on Friday, but still suffered steep losses for the week due to deposit outflows and concerns over the banking system. PacWest and Western Alliance were hit hard, with PacWest down over 68% for the week and Western Alliance falling 51%. Analysts warn that the stocks have become detached from their fundamentals and are calling for regulatory changes to calm the banking system. JPMorgan Chase upgraded Western Alliance, Zions and Comerica to overweight on Friday, saying the bank stocks "appear substantially mispriced to us."
Shares of PacWest Bancorp and Western Alliance Bancorp plunged as reports of both banks exploring strategic options sparked investor worries of a widening financial crisis. Western Alliance denied the report, calling it "categorically false in all respects," and said it was weighing legal options against the newspaper. The KBW Regional Banking index dropped 3.3%.
First Republic's stock is up more than 4% in premarket trading as the regional bank searches for a potential rescue deal to reshape its business after suffering massive deposit outflows in the first quarter. U.S. officials are coordinating meetings with other banks to broker a rescue plan for First Republic. The bank's advisors are preparing to pitch larger banks on a plan that would let the regional lender sell bonds and other assets at an above-market rate and then raise equity. The sales would result in a loss for the banks that buy the bonds, but could be cheaper long-term than letting the bank fail and get seized by regulators.
Shares of First Republic Bank continue to plummet, posing a fresh challenge for the Biden administration and industry regulators. The bank has lost roughly half of its value and experienced deposit outflows of over $104 billion during the first three months of the year. Government officials, regulators, and industry executives are scrambling to find a solution, with selling the bank to a healthier financial institution being the preferred remedy. However, finding a buyer willing to absorb the unrecognized losses on bonds owned by the bank will not be easy. The Federal Reserve and the Federal Deposit Insurance Corporation will release reports on what went wrong with other midsize banks and propose regulatory changes to avoid future failures.
Shares of First Republic Bank plummeted as investors reacted to the bank's financial disclosures, which revealed a loss of over 40% of its deposits in March due to unprecedented deposit outflows. The bank's stock has been volatile, with trading halted eight times on Wednesday. First Republic has tried to reassure customers and investors, but concerns about its long-term viability persist. The bank has announced plans to cut costs, including laying off 20-to-25% of its workforce and reducing its real estate holdings.
First Republic's stock plummeted 49% after revealing an outflow of more than $100 billion in deposits in March, raising new questions about the fate of the San Francisco lender. The bank outlined its survival strategy, including increasing insured deposits, trimming borrowings, shrinking its balance sheet, reducing its workforce by 20-25%, and pursuing other strategic options, including a sale or raising more capital. The creation of a "bad bank" was also reported as a possibility.
First Republic Bank's stock plummeted more than 25% as the bank reported a major loss of $102 billion in deposits over the first three months of 2023, making up more than half of the $176 billion retained by the bank at the end of last year. The bank's profit fell 33% to $269 million over the three months ending in March when compared with the same period last year, and revenue dropped 13% to $1.2 billion over the first three months of 2023. The bank's CEO acknowledged "unprecedented deposit outflows" and "challenges and uncertainties."
First Republic's stock dropped over 29% after revealing an outflow of over $100 billion in deposits in March, raising questions about the fate of the San Francisco lender. The bank plans to increase insured deposits, trim borrowings, shrink its balance sheet, reduce its workforce by 20-25%, and pursue strategic options, including a sale or raising more capital. Analysts say the bank faces uncertainty as it tries to recover from last month's chaos, and its future is uncertain.
First Republic Bank is set to release its first-quarter earnings report, which will reveal the extent of the damage caused by deposit outflows at the bank. The bank has been at the center of a crisis of confidence in midsize and smaller U.S. banks, and concerns have mounted about other lenders facing a liquidity crunch. First Republic had to be rescued by JPMorgan Chase & Co. and other big banks last month.