JPMorgan Chase, Charles Schwab & 8 Other Banks Drop in Market Value After SVB Crash — Is Your Money Safe?
Financial stocks took a pounding on March 13 as panicked investors aimed to cut their losses amid fears that the collapse of Silicon Valley Bank and Signature Bank will lead to even more bank failures. Many observers now envision a crisis similar to the Great Recession of 2007-09, leaving shareholders and bank customers alike wondering about the safety of their investments and deposits.
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The 10 largest bank stocks in the United States lost a combined $76 billion in market capitalization on Monday, Forbes reported. Among the financial institutions hit were Charles Schwab and Truist Financial, each of which saw shares fall by double digits. Major national banks like JPMorgan Chase, Citigroup and Bank of America also reported selloffs, while shares of regional banks such as First Republic and Western Alliance sank 50% or more.
Trading was so volatile that the Nasdaq Trader website published a list of bank shares that were placed under a temporary regulatory halt, Newsweek reported. More than 20 bank stocks were on that list, including Charles Schwab, PacWest Bancorp, East West Bancorp, and KeyCorp.
The nation’s 10 largest bank stocks have lost nearly $190 billion in value since Wednesday, March 9, which was the final trading session before SVB’s collapse started dragging the sector down. All but one of the S&P 500’s 25 worst performers on Monday were financial stocks.
As previously reported by GOBankingRates, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as a receiver. The last FDIC-insured institution to close was Almena State Bank in October 2020.
The collapse of SVB was considered a major red flag in the banking industry because of its size and influence. It was the 16th largest bank in the United States, was 40 years old, and was “important for high-tech startups,” according to Jon Maier, chief investment officer at Global X.
“The impact on regional banks will be huge,” Maier wrote in an email note shared with GOBankingRates. “Expect consolidation, and the winners will be the big banks, who will charge higher fees and be more restrictive on to whom they invest to. The losers will be startups with less access to capital.”
On Monday, Bank of America analyst Ebrahim Poonawala cut his price targets for 24 regional banks by an average of 24%, citing potentially higher compliance costs for the companies amid more intense regulatory scrutiny.
Schwab and other financial firms with massive bond holdings of longer maturities were especially impacted by the SVB failure, CNBC reported. The fear is that these firms, like SVB, will need to sell these holdings at huge losses in order to cover deposit withdrawals.
Meanwhile, investors and bank customers have been getting mixed messages about the severity of the problem. While some analysts warn of a lot more pain to come — including continued stock declines and more bank failures — others insist the problem has been overstated.
“We believe some of the recent sell-off in banks has been overdone — especially in select universal banks, which remain well capitalized and sufficiently liquid to continue to serve clients,” Solita Marcelli, UBS Global Wealth Management’s chief Americas investment officer, wrote in a Monday note.
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Analysts at LPL Financial offered a similar assessment in an email shared with GOBankingRates.
“At this time, we do not believe the SVB and [Signature] bank failures are a deeper sign of things to come,” LPL wrote. “However, we are paying close attention to ongoing developments in the banking sector and in other industries for hints of any widespread contagion. Indeed, more banks may come under distress (72 FDIC-insured banks have failed over the last 10 years), but we are not expecting SVB and SBNY to be the first steps on the way to a systemic crisis.”
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