Bank stocks ended the last trading month of the first quarter with mixed trades on Friday, as positive U.S. inflation data lifted the broad equities market after a rough start to 2023 for regional banks and other lenders.
Regional bank stocks have been hard-hit in recent weeks on liquidity concerns after the quick failure of Silicon Valley Bank and Signature Bank during the second week of March.
While banks have seen a flow of deposits from smaller lenders to larger institutions, the latest weekly bank borrowing numbers for the U.S. Federal Reserve signaled more stability in the system.
Overall, the sector has been under intense scrutiny by investors in a dramatic few weeks that saw the launch of a new backstop program by the Fed, as well as hearings this past week on Capitol Hill on what went wrong at Silicon Valley Bank and even new regional bank regulatory proposals from President Joe Biden.
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On Friday, regional bank stocks continued their slide as the KBW Nasdaq Bank Index
BKX,
dipped 0.2%, for a loss of about 19.6% for the first quarter.
First Republic Bank
FRC,
fell 0.9% on Friday to bring its year-to-date loss to 88.9% as the most hard-hit stock in the KBW Nasdaq Bank Index. Zions Bancorp
ZION,
dropped 2.9% on Friday. PacWest Bancorp
PACW,
rose 0.9% for the day but it’s lost 58.4% so far in 2023.
The Financial Select Sector SPDR Fund
XLF,
rose 0.3 percent, but remained in the negative column for the first quarter with a loss of 6.7%.
The SPDR S&P Regional Banking ETF
KRE,
rose 0.3% on Friday but is down 25.9% in 2023.
Among other bank stocks, Metropolitan Bank Holding Corp.
MCB,
is rallying 21.1% after the parent of New York-based Metropolitan Commercial Bank said it remains “well capitalized across all measures of regulatory capital” and that “liquidity remains strong” and that its exit from crypto currency deposits is almost complete.
The update came late Thursday, after the stock tumbled 27.6% on Thursday, and had plunged 54% since the recent regional banking turmoil erupted after the March 8 close.
Banks borrowed $153 billion from the Fed in the week ended March 29, down from $164 billion in the week before that, according to data released Thursday.
The numbers suggest a sign of stabilization after the collapse of Silicon Valley Bank and Signature Bank earlier this month. Banks pivoted their borrowing to the Fed’s Bank Term Funding Program (BTFP) enacted on March 12, as Fed lending from this bucket increased by $10.7 billion to $64.4 billion as of March 29.
Fed discount window borrowing fell to $88.2 billion from $110.5 billion.
Jefferies banking analyst Ken Usdin noted Friday that rotation into the Bank Term Funding Program (BTFP) is a sign of better pricing terms compared to the Fed’s discount window.
“Further, banks can pledge government guaranteed securities for par value through the BTFP versus going to the discount window and taking asset haircuts,” Usdin said. “That said, the discount window accepts a broader range of collateral (including loans).”
While regional banks have been hard-hit, larger banks have been choppy in 2023 as well as economic indicators pointed to a recession.
JPMorgan Chase & Co.
JPM,
stock rose 0.4% on Friday but it’s holding on to a 3.6% year-to-date loss. A component of the Dow Jones Industrial Average
DJIA,
JPMorgan has also stepped in with the Fed to backstop First Republic Bank
FRC,
Goldman Sachs Group Inc.
GS,
rose 0.9% on Friday, while holding on to a loss of 5.6% in 2023.
Morgan Stanley
MS,
is up 0.4% on Friday, with a gain of 1.7% so far in 2023.
Citigroup Inc.
C,
rose 1% on Friday and is up 2.9% for the first quarter.
Wells Fargo & Co.
WFC,
is up 0.5% on Friday, and has fallen 9.1% in 2023. On Thursday ,the U.S. Federal Reserve and the U.S. Treasury Department fined the bank about $98 million for compliance infractions involving a providing trading tool called Eximbills to an unnamed foreign bank, which used the platform to process $532 million in prohibited transactions between 2010 and 2015, according to a statement from the Fed.
Another seismic change in the banking sector this quarter was the shotgun marriage of UBS Group Ag
UBS,
and Credit Suisse
CS,
U.S.-listed shares of UBS rose 2.9% on Friday, adding to a 13% gain for the year, while Credit Suisse rose 3% while holding on to a 70% loss in 2023.
