2023-03-16 06:55:31 ET
- Post the fallout of the Silicon Valley Bank ( SIVB ), investors have concerns surrounding bank solvency, bank liquidity, and bank profitability.
- UBS' ( UBS ) UBS Wealth chief information officer, Mark Haefele said that the recent action by the FDIC to guarantee deposits and by the Fed to lend to banks that require funds should solve liquidity-related risks for U.S. banks and also for the U.S. branches of foreign banks.
- He adds that risk to depositors in the vast majority of institutions is extremely low.
- However, challenges like tight funding conditions for some individual banks and sector profitability facing headwinds more broadly may affect the banks.
- Haefele suggests that investors with excess exposure to bank equities should diversify into other sectors.
- Providing a neutral position on European financials, he assigns a "least preferred" stance on U.S. financials.
- The European Central Bank meets this Thursday and had been widely expected to hike rates by 50bps; Swiss National Bank and Federal Reserve are scheduled to meet next week.
- In the past 1-month trading, Financial Select Sector SPDR ETF ( XLF ) posted a 14.4% drop while iShares Global Financials ETF ( IXG ) fell 12.2%.
For further details see:
UBS Wealth's information officer believes solvency fears on banks are overdone