NEWSLETTER
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The failure this month of Silicon Valley Bank and Signature Bank, and the steps of the largest banks to bail out First Republic Bank (New York Stock Exchange: FRC) has raised fears about the financial strength of other lenders of similar size. Such stress on the banking system may negatively affect industries that rely on regional sources of financing, Wells Fargo strategists said Monday in a report.
“When you worry about capital growth, risky endeavors (capex, M&A, buybacks) are reevaluated,” Christopher P. Harvey, an analyst at Wells Fargo, said in a March 20 report. “Regional banks are big commercial real estate lenders, so tighter capital could weigh on the labor-intensive construction sector.”
A decision this week by the Federal Reserve to pause rate hikes would be positive for risk markets in the short term, according to Wells Fargo.
“On the stabilization and rebound in equities, we would recommend repositioning the portfolio in less cyclical and longer duration positions,” the report said. “The anticipated capital problems and behavioral impact of bank stress will likely spill over into the economy.”
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More on the banking crisis:
National Bank of Saudi Arabia suffers more than $1 billion loss on Credit Suisse stake: March 20 report
SVB offer window extended amid “substantial interest” from potential buyers March 20
JPMorgan’s Jamie Dimon leads effort to stabilize First Republic Bank on March 20First Republic Bank shares sink to record lows as S&P downgrades again on March 20
SVB Financial cut from records due to FDIC takeover of bank on March 20
New York Community Bancorp unit agrees to buy Signature Bank deposits and some loans March 19
The Fed, the ECB and four other central banks take “coordinated action” to guarantee the liquidity of the dollar on March 19
