Persistent Regional Bank Crisis Worries Keep Investors Guessing, Stocks Fall

Barry Adams
04 May, 2023
New York City

Benchmark indexes traded down and regional banks declined sharply on the growing realization that the regional banking crisis is not likely to go away anytime soon.   

The ETF tracking regional banks, KRE, declined more than 6%. 

PacWest plunged more than 40% on the news that the California bank is evaluating its strategic options including company sale. 

First Horizon Corp tanked 38% after TD Bank terminated its plan to acquire the Tennessee-based bank citing possible regulatory delays for its merger plan. 

Zions Bancorp declined 15.6% and Western Alliance Bancorp dropped 45.6%.   

Banks of all sizes are carrying significant unrealized losses in their Treasury securities assets and banks with large percentage of deposits above the FDIC insured levels are especially vulnerable to sudden deposit outflows. 

At the end of 2022, the FDIC estimated $622 billion in losses in Treasury debts held by banks of all sizes. 

Stress in the regional banks is likely to worsen in the coming weeks and the crisis may persist well into 2024 as long as the Federal Reserve continues to hike rates or hold rates at elevated levels. 

 

U.S. Indexes & Yields 

The S&P 500 index fell 0.6% to 4,065.10 and the Nasdaq Composite decreased 0.4% to 11,971.97.

The yield on 2-year Treasury notes declined to 3.86%, 10-year Treasury notes edged down to 3.37% and 30-year Treasury bonds held at 3.72%. 

Crude oil fell 21 cents to $68.39 a barrel and natural gas prices fell 6 cents to $2.10 a thermal unit. 

 

U.S. Stock Movers 

PacWest Bancorp tanked 56.8% to $2.77 on the report that the company is looking for capital infusion, merger partner or the sale of the bank. 

Zions Bancorp dropped 13.9% to $19.51 and Western Alliance declined 38.5% to $18.05. 

First Horizon Crop plunged 37.6% to $9.42 after Canada-based TB Bank terminated its merger plan on the regulatory delay worries. 

Peloton Interactive Inc declined 13.7% to $7.62 after the company reported wider-than-expected loss. 

Shopify Inc soared 27.9% to $59.16 after the e-commerce platform operator reported better-than-expected earnings. 

The Canada-based company also announced its plan to lay off 20% of its staff. 

Paramount Global Class A plunged 23.4% to $19.81 after the parent of Paramount Pictures and CBS network reported weaker-than-expected earnings. 

The company also slashed its dividend to 5 cents from 24 cents per common stock as the company "moves toward streaming profitability."

Revenue in its film studio division declined 6% and television and cable properties including MTV and Comedy Central fell 8% to $5.2 billion. 

Paramount said revenue in its streaming service unit, which includes Paramount+ and Pluto TV, rose 39% to $1.5 billion but losses expanded to $511 million from $456 million in the previous year.