Bank stocks end tough quarter with gains as sector stabilizes despite outflows from savings accounts

The KBW Nasdaq Bank Index BKX, +0.88% rose 0.9% on Friday but held on to a loss of about 18.7% for the first quarter.

By comparison, the Nasdaq COMP, +1.74% rose 16.8% in the first quarter, the S&P 500 SPX, +1.44% was up 7% and the Dow Jones Industrial Average DJIA, +1.26% moved up by 0.4% as of Friday’s close.

The Financial Select Sector SPDR exchange-traded fund XLF, +1.10% rose 1% on Friday but remained in the negative column for the first quarter with a loss of 6.1%.

The SPDR S&P Regional Banking ETF KRE, +0.99% rose 1% on Friday but is down 25.3% so far in 2023.

First Republic Bank’s FRC, +2.19% stock rose 2.2% on Friday and reduced its year-to-date loss to 88.5% as the most hard-hit stock in the KBW Nasdaq Bank Index.

Zions Bancorp ZION, -1.22% dropped 1.2% on Friday and Comerica Inc. CMA, -1.45% fell 1.5%. PacWest Bancorp PACW, +3.18% rose 3.2%.

Regional-bank stocks have been hard hit in recent weeks on liquidity concerns after the swift collapse 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 couple of weeks that saw the launch of a new backstop program by the Fed, hearings this past week on Capitol Hill on what went wrong at Silicon Valley Bank and new regional-bank regulatory proposals from President Joe Biden.

Also this week, First Citizens BancShares Inc. FCNCA, +4.21% won an auction held by the Federal Deposit Insurance Corp. for the former Silicon Valley Bank on Monday.

Also read: Banks trim borrowing from the Fed for second straight week in wake of SVB failure

Also read: Biden calls for new rules for large regional banks

Also read: House members focus on need for more oversight of capital and liquidity after failure of Silicon Valley Bank

Also read: Money-market funds swell to record $5.4 trillion as savers pull money from bank deposits

Also read: First Citizens grows bigger with Silicon Valley Bank deal, but not big enough to move to next regulatory level

On Friday, Metropolitan Bank Holding Corp.  MCB, +33.64% rallied 33.6% after the parent of New York-based Metropolitan Commercial Bank said it remains “well capitalized across all measures of regulatory capital,” that “liquidity remains strong” and that its exit from cryptocurrency deposits is almost complete.

The update came late Thursday after the stock had tumbled 27.6%. It had plunged 54% since the regional-banking turmoil erupted after the March 8 close.

Banks borrowed $153 billion from the Fed in the week ending 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 two bank failures earlier this month. Banks pivoted their borrowing to the Fed’s Bank Term Funding Program (BTFP) enacted on March 12, with Fed lending from this bucket increasing 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 BTFP is a sign of better pricing terms compared with 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 also been choppy in 2023 as economic indicators pointed to a recession.

JPMorgan Chase & Co.’s JPM, +1.21% stock rose 1.2% on Friday but is holding on to a 2.8% year-to-date loss. A component of the Dow Jones Industrial Average DJIA, +1.26%, JPMorgan has also stepped in with the Fed to backstop First Republic Bank.

Goldman Sachs Group Inc. GS, +1.86% rose 1.9% on Friday while holding on to a loss of 4.7% in 2023.

Morgan Stanley MS, +1.96% rose 2% on Friday, with a gain of 3.3% so far in 2023.

Citigroup Inc. C, +1.78% rose 1.8% on Friday and is up 3.7% for the first quarter.

Wells Fargo & Co. WFC, ended Friday unchanged and has fallen 9.5% 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 provision of a 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 UBS, +4.05% and Credit Suisse CS, +2.18%. U.S.-listed shares of UBS rose 4.1% on Friday, adding to a 13% gain for the year, while Credit Suisse rose 2.2% while holding on to a 71% loss in 2023.

Also read: Wall Street bonuses fall more sharply than in any year since 2008. Policy makers mull the economic impact.

Also read: Silicon Valley Bank depositors will get ‘all of their money,’ regulators say