Bank stocks finished a tough week with mixed trading Friday as investors balanced jitters around bank liquidity and weakness in Deutsche Bank shares against slightly positive emergency lending data and at least one analyst upgrade in the sector.
First Republic Bank
dropped 0.6% to $12.46, but remained above its all-time intraday low of $11.52 a share, as a capital injection plan reportedly in the works from JPMorgan Chase & Co.
and others has yet to materialize.
U.S.-listed stock fell 3.5% after a rise in the price of its credit default swaps.
Still, Deutsche Bank’s 5-year credit-default swap’s trading level of 215 on Friday is nowhere near the peak for Credit Suisse
which was 1,194, according to S&P Global data.
See: Deutsche Bank’s debt insurance spikes, but eurozone bank levels aren’t that different from last year
In a sign of reduced bank stress though, U.S. banks drew $163.9 billion in emergency borrowing from the Federal Reserve in the week ended March 22, compared to $164.7 billion in the prior week.
First Horizon National Corp.
rallied by nearly 6% after Wells Fargo upgraded the stock to overweight from equal weight and set a price target of $25 a share. Analyst Jared Shaw said the company’s pending merger with TD
remains on track and that the stock offers an attractive valuation at current levels.
The KBW Nasdaq Bank Index
rose 0.3% after falling into negative territory earlier in the day. The Financial Select SPDR ETF
moved down by 0.3% and the SPDR S&P Regional Banking ETF
Among megabanks, Morgan Stanley
dropped 2.7%, Citigroup Inc.
moved lower by 1.2%, while Goldman Sachs Group Inc.
and Wells Fargo & Co.
fell about 1% each.
rose 0.5% after falling more than 5 earlier in the day, while Zions Bancorp
rose 4%. PacWest Bancorp
rose 3.3% and Metropolitan Bank Holding Corp.
moved higher by 3.2%.
Regions Financial Corp.
and Fifth Third Bancorp
top a list of nine regional banks as measured by total available liquidity to cover potential deposit outflows, Citi banking analyst Keith Horowitz said in a research note on Thursday.
Regions Financial currently has about 145% of available liquidity to cover its uninsured deposits, followed by 136% for KeyCorp and 134% for Fifth Third Bancorp.
Comerica ranks at the bottom of the list with 96% coverage of its uninsured deposits; followed by Citizens Financial Group Inc.
“We recognize that funding the balance sheet with wholesale funding would present a material earnings headwind, but the purpose of this exercise is to show that sufficient liquidity is available even in the case of significant deposit outflow,” Horowitz said.
Debt levels reported by the Federal Home Loan Bank, which provides extra debt to banks, has leveled off, which “suggests either banks’ demand for immediate funding has cooled, or they are turning to other facilities,” Horowitz said.
Prior to Friday’s trades, the KBW Nasdaq Bank Index was down 22.6% so far in 2023 as the March 10 failure of Silicon Valley Bank has impacted the sector, compared to a 2.8% year-to-date increase by the S&P 500
Charles Schwab Corp.
rose 0.3% after CEO Walt Bettinger said the brokerage and financial services firm has enough resources to continue to operate even if it lost its deposits over the coming year, The Wall Street Journal reported Friday.
Without having to sell a single security in its portfolio, “there would be a sufficient amount of liquidity right there to cover if 100% of our bank’s deposits ran off,” Bettinger said in the report. Schwab could borrow from the Federal Home Loan Bank, issue certificates of deposit, or collect interest paid on its bond portfolio, he said.
The comments came as investors study reduced values of long-term holdings and other assets held by financial firms that may not be sufficient to cover a sharp drop in deposits. In the case of Charles Schwab, the bank is holding some bonds that are currently under water on paper.
Seawolf Capital has disclosed it has a short position in Schwab. Seawolf Capital portfolio manager Porter Collins told the WSJ that Schwab has mismanaged its balance sheet.
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