The rescue of the First Republic through its sale to JPMorgan after its intervention by the US federal authorities did not leave investors alone. Far from it, the US regional bank suffered a hard hit on the stock market on Tuesday, with general losses of over 20% in the main entities and up to 30% in the case of the Pacific Western Bank at mid-morning in New York. At the time, Western Alliance was posting a 20% loss.
It was, for many of these entities, the worst day since the March 10 collapse of Silicon Valley Bank put the entire industry in trouble.
The sell-off pushed the KBW regional banking index (KRX) to 5.2%, its lowest level since November 2020. And the S exchange-traded fund
The Ibex 35 closed with a fall of 1.72%, to stand at 9,082 integers, after the recess on May 1 and after the rescue of the First Republic Bank.
"If the First Republic can suffer a crisis of confidence, the same can happen to any bank in this country," diagnosed the chief executive of Longbow Asset Management, reported Reuters. "The failure of the First Republic unfortunately means," he added, "that the other troubled regional banks should probably continue to sleep with one eye open."
But the bleeding in the regional entities of the United States is not necessarily, and by itself, a fatal omen for the evolution in the markets, in the medium term, of the bank as a whole.
The president of Whalen Global Advisors, Chris Whalen, put it this way in statements to the Financial Times: “Investors are going from weakest bank to weakest bank. And it's not just short sellers, but also clients asking if their deposits are safe." So "the market is focusing on the weakest links and looking for entities that are vulnerable."
But while "market jitters are understandable" after the First Republic flop, long-term investors have been buying more bank shares in recent weeks, said Michael Metcalfe, director of macro strategy at State Street Global Markets. And this, according to him, suggests that "there is no panic" nor are we facing "a broader contagion." His conclusion was that the stock market falls on Tuesday were driven "rather by speculation."
