Arab Press

بالشعب و للشعب
Wednesday, Jun 07, 2023

More US banks under pressure as Fed faces rate hike backlash

More US banks under pressure as Fed faces rate hike backlash

PacWest has seen its share price hammered by 90% since the start of the US banking turmoil while other major regional lenders are also in the firing line.
Another US regional lender has revealed talks to shore up its finances and a further has had its share price was clobbered amid the crisis of confidence to hit the country's banking sector.

Three lenders - Silicon Valley Bank, Signature Bank and First Republic - have failed this year on the back of balance sheet pressure caused by rising interest rates that have hit the value of their bondholdings.

Regional lenders have seen their share prices come under further pressure this week as investors seek out signs of any weakness.

First Republic was bought by Wall Street's largest bank JPMorgan on Monday after it failed to recover from a $100bn deposit flight in March.

LA-based lender PacWest Bancorp saw its shares decline by more than 50% on Wednesday - taking its market value loss to 90% during the crisis to date.

They were down a further 30% in Thursday's pre-market trading after it revealed talks with potential partners and investors about its "strategic options" despite a sizeable cash injection that was agreed at the start of the industry crisis.

Shares were down more than 40% when markets opened on Thursday morning in the US.

The bank said that while it had not experienced any unusual deposit outflows since the sale of First Republic, it was normal for the company and its board of directors to "continuously review" those options.

"Recently, the company has been approached by several potential partners and investors - discussions are ongoing," its statement said.

"The company will continue to evaluate all options to maximise shareholder value."

The options could include a sale or capital raising, the Reuters news agency reported citing a source.

Other regional lenders have seen their share prices hammered in recent days.

Arizona-based Western Alliance lost 23% of its market value on Wednesday despite insisting it had not experienced any unusual deposit outflows and had adequate liquidity.

Its losses deepened on Thursday as much as 62% with trading halted at multiple points through the morning.

There are fears the crisis of confidence will hurt the availability of credit in the US economy, already tipped by economists to enter recession this year.

Ten consecutive rate hikes imposed by the US Federal Reserve to keep a lid on inflation have been blamed for the banking sector's woes.

The Fed raised its main rate by a further quarter point on Wednesday night despite the banking turmoil and economic slowdown.

It did, however, give a hint that the rise would be the last for a while as it digested the impact of its tightening cycle.

There is still a "growing concern that the rapid pace" of higher interest rates has undermined the foundations of some mid-sized US banks, the head of financial analysis at AJ Bell said.

"Hardly household names with global investors until the last few months, now every ear is straining to catch the sector's next distress call."

"Banking stocks have taken another beating today as markets worry that PacWest might be the next domino to fall.

"Even if [the PacWest] alarm proves to be a false one, the implications for the global economy could be huge," Danni Hewson said.

"Reluctance to lend from a nervous sector which is battening down the hatches could mean that dreams of a softish landing become recession-filled nightmares."

One critic of the Fed response, the boss of financial advisory and asset management firm deVere Group, said the US central bank had failed at every hurdle since the inflation problem first surfaced.

Nigel Green said it had risked a longer-term recession through the latest rate hike.

"Clearly, this would not only be a huge issue for the US, but the global economy too," he warned.

"First, the crisis within the US financial system is still not over. There remain serious and legitimate concerns that after a string of bank failures, there could be more to come.

"The turmoil from the banking crisis is leading to a drop in bank lending, tightening the credit conditions for households and businesses. In turn, this will inevitably lead to a slowdown in economic activity and hiring.

"Chair Powell himself has said at a news conference that the bank turmoil had the equivalent impact of at least one quarter-point rate increase."
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

Arab Press
Close
0:00
0:00
US and European Intelligence Agencies Uncover Evidence of Ukrainian Role in Terror Attack on Nord Stream Pipeline
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
Drone Attack on Moscow's Wealthiest Neighborhoods Suspected to be Launched by Ukraine
AI ‘extinction’ should be same priority as nuclear war – experts
Prominent Hacker Forum RaidForums Suffers Substantial Data Breach
Nvidia CEO Huang says firms, individuals without AI expertise will be left behind
WPP Revolutionizes Advertising with NVIDIA's AI Powerhouse
Olam Group Faces Setback in Saudi Arabia Agribusiness Unit Listing
Kuwait Open to Negotiating Visa Ban with Philippines
Goldman Sachs Cuts Israeli Shekel Forecasts on Politics, Intervention
Iran to Unveil New Hypersonic Missile
Two US Employees Fired For Chasing Robbers Out Of Store As They Broke ''Company Policy''
Pfizer, the EU, and disappearing ink - Smoke, Mirrors, and the Billion-Dose Pfizer Vaccine Deal: EU's 'Open Secret
The Sussexes' Royal Rebound: Could Harry and Meghan Markle Return to the UK?
A provocative study suggests: Left-Wing Extremism and its Unsettling Connection to Psychopathy and Narcissism
France Arrests 10 on Suspicion of Failing to Respond in Time to Migrant Drowning
Neuralink Receives FDA Approval for First-in-Human Clinical Study
Is Saudi Arabia the holiest place in the world? Ancient Hebrew Inscriptions from "The Mount Sinai Stand" Discovered in Saudi Arabia
Bernard Arnault Loses $11.2 Billion in One Day as Investors Fear Slowdown in US Growth Will Reduce Demand for Luxury Products
Russian’s Wagner Group leader: “I am not a chef, I am a butcher. Russia is in danger of a revolution like in 1917.”
TikTok Sues Montana Over Law Banning the App
Ron DeSantis Jumps Into 2024 Presidential Race, Setting Up Showdown With Trump
Saudi Minister of Finance Mohammed Al-Jadaan on the importance of economic integration among Arab nations
Talks between US House Republicans and President Biden's Democratic administration on raising the federal government's $31.4tn debt ceiling have paused
Syrian President Bashar al-Assad received a warm welcome at an Arab summit in Jeddah
Biden Administration Eyeing High-Profile Visits to China: The Biden Administration is heating things up by looking into setting up a series of top-level visits to Beijing by top officials in the coming months
New evidence in special counsel probe may undercut Trump’s claim documents he took were automatically declassified
Debt Ceiling Crises Have Unleashed Political Chaos
Weibao Wang, a former software engineer at Apple, was charged with stealing trade secrets related to autonomous systems, including self-driving cars
Mobile phone giant Vodafone to cut 11,000 jobs globally over three years as new boss says its performance not good enough
Elon Musk compares George Soros to Magneto, the supervillain from the Marvel Comics series.
Warren Buffett Sells TSMC Shares Over Concerns About Taiwan's Stability
New Study Finds That Secondary Bacterial Pneumonia Is a Major Cause of Death in COVID-19 Patients Who Require Ventilator Assistance
King Charles III being crowned.
'Godfather Of AI' Geoffrey Hinton Quits Google To Warn Of The Tech's Dangers
A Real woman
Vermont Man Charged with Stalking After Secretly Tracking Woman with Apple AirTag
Elon Musk Statements About Tesla Autopilot Could Be 'Deepfakes,' Lawyers Claim. Judge Evette Pennypacker Does Not Understand How Far and Advanced This Technology Became
Ukraine More Prepared for Counterattack as Reinforcements Arrive
UK Prime Minister Rishi Sunak and Italian Prime Minister Giorgia Meloni Discuss Migration, Defence, and Ukraine
China Unveils Construction Road Map for Lunar Research Station
AT&T's Successful Test of Satellite-Based Phone Call Raises Possibility of Widespread Coverage
CNN: "Joe Biden is asking for four more years — when 74% of Americans think the country is heading the wrong way“
Turkish President Recep Tayyip Erdogan Cuts Short Live TV Interview Due to Health Issue
US Congresswoman threaten Twitter Files journalist with arrest
Pulitzer Prize-winning journalist Seymour Hersh slams New York Times' pro-government stance and treatment of sources
Enough is enough: it's time to end the war in Ukraine. While Russia may be to blame for starting it, Russia is not the one refusing to stop it
Fox News Settles their case with Dominion Voting Systems for a staggering $787.5 MILLION
21-year-old Massachusetts Air National Guard member Jack Teixeira has been arrested for leaking classified Pentagon Documents
Bank of America cuts short conference after outrage at Ukraine comments
×