Fears of possible contagion have eased - but not been fully dispelled.
An indicator of credit risk among euro zone banks hit its highest level since mid-July on Monday, while ratings agency Moody's cut its outlook on the U.S. banking system to negative from stable citing a "rapid deterioration in the operating environment."
The VIX volatility index, Wall Street's "fear gauge," neared six-month highs overnight. But U.S. regional bank shares - which have been hit hardest so far - nudged up on hopes the worst of the market rout is over. The S&P 500 regional banks index rebounded 1.4%, leaving it with a 26% loss over the past five sessions. First Republic Bank surged 27%, while KeyCorp jumped over 7%. Among large U.S. banks - where sources say customers have moved deposits to over the past week - Citigroup regained almost 6% and Wells Fargo added 4.6%. "If we do not see any high-profile failures in the near future, then the fears would subside," said Jack Ablin, chief investment officer at Cresset Capital.
Hedge fund Citadel helped send a signal of confidence in the sector by buying a 5.3% stake in Western Alliance Bancorporation , which was among lenders swept up in contagion fears.
There were other signs of a change in mood. Anson Funds, which manages $1.6 billion, bought an undisclosed number of shares of First Republic on Monday, associate portfolio manager Rob Mills told Reuters.
RATES RETHINK
A furious race to reprice interest rate expectations also
buffeted markets as investors bet the U.S. Federal Reserve will
be reluctant to hike next week.
Traders currently see a 77% chance of a 25 basis-point
increase at the meeting, while expectations for no rate hike
have fallen to 23%. Early last week, a 25 basis-point hike was
fully priced in, with a 70% chance seen of 50 basis points.
"Part of the stabilization today is folks feeling as if
the Fed might back off from some of the hawkish expectations,"
said Matthew Keator, managing partner at wealth management firm
Keator Group. "If the Fed isn't careful, they could create some
unintended shocks to the system."
U.S. Treasury yields rose on Tuesday, a day after major
declines, as investors consolidated positions and weighed the
monetary policy impact of banking system turmoil against
stubbornly high inflation.
To be sure, analysts say uncertainty remains in the
financial sector. Investors worry about the health of smaller
banks, the prospect of tighter regulation and authorities'
preference for protecting depositors before shareholders.
In the U.S., Senate Banking Committee Chairman Sherrod Brown
urged Congress to enact regulations to strengthen stress tests
and capital and liquidity standards for banks, and said he hoped
the Fed would not raise rates when it meets next.
INVESTIGATIONS
As markets adjusted to the impact of SVB's collapse,
regulars turned their focus to the circumstances around the
bank's collapse. The Justice Department investigation is in
early stages and may not result in allegations of wrongdoing or
charges being filed, a source said.
Officials are also examining stock sales by officers of SVB Financial Group, which owned the bank, the WSJ reported, citing people familiar with the matter. Spokespeople for the SEC, SVB and the Justice Department declined to comment. New York’s financial regulator said its decision to close Signature Bank had "nothing to do with crypto" and instead cited “a significant crisis of confidence in the bank’s leadership” after SVB's demise.
Signature and three former top executives were also sued on
Tuesday by shareholders who accused the bank of fraudulently
claiming it was financially strong a mere three days before it
was seized by a state regulator. Signature did not immediately
respond to requests for comment.
Apollo Global Management Inc , Blackstone Inc ,
and KKR & Co Inc have expressed interest in a book of
loans held by SVB, Bloomberg News reported on Tuesday, citing
people familiar with the matter.
The portfolio is seen as an attractive buy and was not a
contributing factor in run that caused SVB's demise, it added.
Buyout giants Ares Management ARES.N and Carlyle Group CG.O
are also looking to buy the loan book, the Financial Times
reported, citing people familiar with the matter.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ANALYSIS-SVB's lightning collapse stuns banking industry FACTBOX-SVB collapse may prompt Fed to go slow on rate hikes
[ nL4N35L2ND]
FACTBOX-Which companies are affected by SVB collapse? GRAPHIC-SVB collapse a sign of pain coming from end of easy-cash
era INSTANT VIEW 3 -Bank stocks tank, markets rethink rate-hike path Major crypto coins stabilise after U.S. intervenes on SVB
collapse GRAPHIC-The Rise and Fall of SVB and Signature Bank Market stress indicators begin to flash after third U.S. bank
folds First Republic able to meet withdrawal demands with JPMorgan
funding BREAKINGVIEWS-Bank rescue buys stability at a high price SVB shock could have chilling effect on British biotech sector The Rise and Fall of SVB and Signature Bank SVB, Signature Bank are first bank failures since 2020 Key gauge of bank stocks slumps to near 3-year low The Rise and Fall of SVB and Signature Bank SVB, Signature Bank are first bank failures since 2020 SVB,
Signature Bank are first bank failures since 2020 How Silicon Valley Bank's collapse ripped through global tech Silicon Valley Bank collapse: What you need to know Bank stocks fall ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Alun John and Sinead Cruise in London, Medha
Singh and Mehnaz Yasmin in Bengaluru, Rae Wee and Tom Westbrook
in Singapore, Chuck Mikolajczak in New York and Trevor Hunicutt
in Washington
Writing by Lincoln Feast, Shri Navaratnam, Alexander Smith and
Deepa Babington
Editing by Mark Potter, Matthew Lewis and Anna Driver)
