WASHINGTON: US bank stocks jumped on Tuesday, recovering some ground after the failure of Silicon Valley Bank and Signature Bank triggered heavy selling by investors who were already anxious about the impact on lenders of rising in-terest rates. Worries about potential contagion had also slammed bank shares in Asia and Europe as investors re-examined their risks, despite assurances from U.S. Pres-ident Joe Biden and other global policymakers that the financial system is safe.
An indicator of credit risk among euro zone banks hit its highest level since mid-July, while ratings agency Moody’s cut its outlook on the U.S. banking system to negative from stable “to reflect the rapid deterioration in the operating environ-ment.”
Although the VIX (.VIX) volatility index, Wall Street’s “fear gauge,” neared six-month highs overnight, U.S. regional bank shares bounced, with First Republic Bank (FRC.N) up 42.3% at $44.40 a share. Banking giants Citigroup Inc (C.N), Wells Fargo (WFC.N) and JP Mor-gan (JPM.N) were also higher. “If we do not see any high-profile failures in the near future, then the fears would subside,” said Jack Ablin, chief investment officer at Cresset Capital.
Hedge fund Citadel helped send a signal of confidence in the sector by buying a 5.3% stake in Western Alliance Bancorporation (WAL.N), which was among lenders swept up in contagion fears. Customers have moved deposits to large U.S. banks including JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Citigroup from smaller lend-ers in the past week, sources familiar with the matter said.
In Europe, where some see lenders as less vulnerable, the banking in-dex (.SX7P) first fell then recovered to rise 2.4%. It posted its biggest percent-age loss in over a year on Monday. “A critical difference between the European and U.S. systems, which will limit the impact across the Atlantic, is that European banks’ bond holdings are lower and their deposits more stable,” Moody’s said in a note.
Shares of embattled Credit Suisse (CSGN.S) slid as much as 4.5% early on after it said customer “outflows stabilized to much lower levels but had not yet re-versed” in its annual report, before paring most of the losses in afternoon trad-ing.
Asian banking stocks had extended their declines overnight, with Japanese banks hard-hit despite reassurances from the Bank of Japan about their capital buffers.
The market gyrations showed that investor worries about potential contagion to lenders worldwide were not entirely dispelled by Biden’s assuranc-es or emergency U.S. measures to shore up banks by giving them access to ad-ditional funding. –Agencies
