Bank stocks ended the last trading month of an eventful first quarter with solid gains 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 ended the session higher after shaking off losses earlier in the day.
The KBW Nasdaq Bank Index BKX,
By comparison, the Nasdaq COMP,
The Financial Select Sector SPDR exchange-traded fund XLF,
The SPDR S&P Regional Banking ETF KRE,
First Republic Bank’s FRC,
Zions Bancorp ZION,
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,
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On Friday, Metropolitan Bank Holding Corp. MCB,
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,
Goldman Sachs Group Inc. GS,
Morgan Stanley MS,
Citigroup Inc. C,
Wells Fargo & Co. WFC,
Another seismic change in the banking sector this quarter was the shotgun marriage of UBS Group UBS,
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