- Bank stocks still remain under pressure and that signals the sector’s turmoil hasn’t ended yet, Jim Bianco said.
- Financial stocks faced a rout over the past month following the collapses of Silicon Valley Bank and Signature Bank.
- Regional banks in the US need to offer higher deposit rates to stop outflows, according to Bianco.
The selloff in financial stocks triggered by last month’s multiple lender failures is still continuing and that signals the banking turmoil isn’t over yet, Wall Street analyst Jim Bianco said.
The KBW bank stock index is down 3% this week, after a 25% slump in March that was the biggest monthly drop in three years. Shares of lenders and other financial companies have been under pressure since the implosions of Silicon Valley Bank, Signature Bank and Silvergate Capital last month.
“Good thing the banking crisis has stabilized. Otherwise, the bank stocks might be in trouble … oh, wait!,” Bianco, who runs Chicago-based Bianco Research, tweeted on Wednesday, alongside a chart showing sharp declines in bank stock indexes.
Smaller and regional banks in the US have borne the brunt of the recent investor pessimism toward the financial sector, especially as they faced large outflows of deposits in the wake of the recent lender collapses. Savers spooked by the banking-sector instability have diverted large amounts of funds into money-market funds and larger banks.
The main issue for regional banks is their profitability, not solvency fears, and they need to offer higher deposit rates to stop the outflows, according to Bianco.
He has also warned of a drop in lending by these smaller banks.
“Banks are losing deposits by the buckets, and they don’t get it as they continue to advertise 0%! And now we have the first evidence of pulling back on lending. … the definition of a credit crunch,” he said in a tweet on Sunday.