- Advertisement -
Due to unprecedented market volatility this week due to recent bank closures in the US and fears of contagion spreading across Europe, the BCA Research team doubts that banks will be able to remain profitable for the foreseeable future. The closings of Silicon Valley Bank and Signature Bank last Sunday night were the largest since the 2008 global financial crisis, and the news rattled the markets. The S&P 500 is up about 1% after briefly losing all of its 2023 gains in the previous session. The KBW regional banking index rose just 0.2% on Thursday. Irene Tunkel, BCA’s chief strategist, said in a note on Thursday that while she does not expect another crisis of this magnitude, the decline in bank performance is supported by overall macroeconomic conditions. She also added that there may be an opportunity for investors to use potential bounces to reduce the weight of the industry. KBWR 1D mountain KBWR Regional Bank index “We believe this remains the most prudent course of action to sell bank assets in the hope of a potential rebound,” she wrote. “In order to lock in the best exit point, we are putting the banks on a downgrade from their current neutral position.” Tunkel gave eight points in support of her “pessimism”: Tightening monetary policy “Declining” demand for loans Tightening lending conditions Expected increase in delinquent payments. Small banks’ net interest margins are under pressure. higher deposit insurance fees Rising regulatory hurdles “We concluded that the banking sector is facing pressure on several fronts, leading to disappointing earnings growth and a prolonged sector lag,” she said.
Credit: www.cnbc.com /
- Advertisement -