2023-03-20 12:46:25 ET
Amid the ongoing turmoil in the financial sector, Goldman Sachs strategist Peter Oppenheimer said Monday that valuations of the banking sector are "healthy" and the current crisis does not indicate a "systemic" issue.
While he doesn't see a looming threat to the overall banking system, the chief global equities strategist at Goldman Sachs told CNBC that the bailout process has raised questions about who will bear the cost as the Federal Reserve and other central banks provide support for individual banks that run into liquidity problems.
"What the market is worried about is that bondholders, which previously were seen to be very safe, may not be as safe as they thought," he said. "Obviously, what investors are thinking about is who will take any of the losses as these further supports come through."
Oppenheimer's comments came as regional bank equities rose on Monday, helped by the regulator-negotiated acquisition of Credit Suisse ( CS ) by UBS ( UBS ). The iShares U.S. Regional Banks ETF ( IAT ) rose about 3% in intraday action, while the SPDR S&P Regional Banking ETF ( KRE ) climbed about 1% .
Oppenheimer contended that private markets have experienced a large increase in deregulation over the last decade, leading some banks to grow significantly. This, in turn, has created additional risk that underlying assets have not been repriced appropriately for the rise in interest rates.
He suggests that investors must distinguish between price performance and who bears the risk of potential losses from underlying risk. Given the current state of the economy, the underlying fundamentals of the banking industry and the overall level of private sector leverage in corporate and household balance sheets are much better than they were prior to the financial crisis of 2008.
Looking at Monday's intraday session, the S&P 500 ( NYSEARCA: SPY ) ( SP500 ) +0.9% , the Nasdaq ( COMP.IND ) +0.4% and the Dow ( DJI ) +1.1% .
Meanwhile, see why Seeking Alpha contributor Mott Capital Management suggests that " the Fed should follow the ECB's approach and hike rates by 25 bps. "
More on the Bank Crisis
- Credit Suisse and UBS: Implications Of A Shotgun Wedding
- UBS upgraded to Buy at BofA as Credit Suisse takeover enhances scale
- Fed, ECB and four other central banks take 'coordinated action' to ensure dollar liquidity
For further details see:
Banks not facing 'systemic' issue - Goldman Sachs' Peter Oppenheimer