2023-03-10 10:24:16 ET
In response to the bank stock swoon triggered by SVB Financial ( SIVB ) funding woes and Silvergate Capital's ( SI ) planned liquidation, Wall Street analysts are emphasizing that the two events are idiosyncratic and not indicative of systemic weakness.
The KBW Bank Index slid 3.3% in Friday morning trading, but had dropped over 5% earlier in the session. SVB Financial's ( SIVB ) stock sank 63% in early trading after a report that the company failed in its capital raising plan and is exploring a sale of the company.
Wells Fargo analyst Jared Shaw called the broad-based selling "an overreaction to fears of a potential bank run, as the space is well-capitalized" in a note to clients.
"Banks have significant sources of additional liquidity, so we view the challenges from rates more as an earnings impact and not as an existential crisis, and do not think depositors should lose confidence," Shaw added.
At Morgan Stanley, analyst Manan Gosalia sees the pressures at SIVB as "highly idiosyncratic and should not be viewed as a read-across to other banks we cover. Yes, funding is a headwind for the industry, but only to NIM (net interest margin) and EPS."
The weakness in bank stocks show that investors are concerned about liquidity across the sector, Gosalia said. "We want to be very clear here... we do not believe there is a liquidity crunch facing the banking industry, and most banks in our coverage have ample access to liquidity."
BofA Securities analyst Ebrahim Poonawala takes a similar tone, saying investors are extrapolating issues specific to a couple of banks to the broader banking sector. "However, the sell-off also highlights a (belated) realization among investors that higher for longer interest rates are negative for the sector’s EPS outlook," he said in a note to clients on Friday.
"While the entire industry is likely to experience heightened funding cost pressure, we still expect this to be an earnings event for most banks, especially those funded with branch-based retail deposits," Poonawala said.
First Republic Bank ( NYSE: FRC ) stock was halted after plunging 22% .
Larger bank names started steadying in midmorning trading, with the largest, JPMorgan Chase ( NYSE: JPM ) rising 1.3% . Others fell moderately: Bank of America ( NYSE: BAC ) -1.6% , Citigroup ( NYSE: C ) -1.8% , Wells Fargo ( NYSE: WFC ) -1.3% , Goldman Sachs ( NYSE: GS ) -2.6% , and Morgan Stanley ( NYSE: MS ) -1.0% .
Among the large regionals: PNC Financial ( PNC ) -0.8%, Truist Financial ( TFC ) -4.7%, U.S. Bancorp ( USB ) -2.8%, Regions Financial ( RF ) -0.5%, KeyCorp ( KEY ) -2.6%, Huntington Bancshares ( HBAN ) -4.8%, Citizens Financial ( CFG ) -2.6%.
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Wall Street analysts say bank stock slide is overeaction to 'idiosyncratic' events