Wall Street Is Betting the Regional Bank Crisis Isn’t Over Yet
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon made a bold call on Monday: his firm’s rescue of First Republic Bank ended the initial phase of the turmoil engulfing banks.
Twenty-four hours later, that prediction was already looking shaky as Wall Street traders drove down shares of regional banks in a rout that resembled the dark days of March. Several sank more than 10%.
These bank bears can find plenty of ammo in the latest academic research, which casts fresh light on industry stresses in the grip of the biggest monetary-tightening campaign in decades.
It finds that a year of interest-rate hikes has driven unrealized losses for banks to an estimated $1.84 trillion, with trouble in commercial real estate only adding to the pain. Lenders are also facing the risk of deposit flight as frustrated savers leave for higher-yielding alternatives.
So after largely taking it on the chin last week, traders are falling prey to renewed concerns about asset-liability mismatches and uninsured deposits across the banking sector.