The sudden collapse of Silicon Valley Bank and Signature Bank — and concerns about the stability of the banking system in general — have driven down the values of institutions across the financial sector.
Charlotte’s banking giants have not been immune. The two headquartered here — Bank of America and Truist — saw a combined $70 billion wiped from their market capitalization between March 6, before SVB’s collapse, and March 17.
Market capitalization — or market cap — refers to the value of a public company, calculated by multiplying the current stock price by the number of shares outstanding. (Stock price and market cap data used for the analysis came from Bloomberg and company filings.)
Truist, which falls into the category of midsize banks considered at higher risk than their larger counterparts, has seen the steepest fall locally.
BofA, meanwhile, has taken a hit but found an upside as customers moved deposits to bigger banks.
In fact, each of the 10 banks with the most deposits in the Charlotte region saw their market caps shrink between March 6 and the end of last week. Six of them saw drops of more than 20%.
Here’s a snapshot of the change in market cap for those banks:
Since the beginning of the year, the overall market capitalization of all publicly traded U.S. banks dropped from about $1.7 trillion as of Jan. 3 to about $1.45 trillion as of the market close on March 17 — a 16% drop. Over the past year, the value of those banks has fallen 33%.
Just since March 10, when Silicon Valley Bank failed, the nation’s publicly traded banks have lost a combined $174 billion in combined value — an average of nearly $500 million per bank.
Markets reeled as investors feared a credit crunch and other issues, sparking a panic not seen since the financial crisis of 2008, said Nigel Green, CEO and founder of independent advisory firm deVere group.
“The emergency lifelines being thrown to banks by regulators and governments, among others, appear to have now halted contagion within the sector, largely containing the crisis from hitting other firms and other sectors,” Green said in a statement.
In a bid to quell additional bank runs, the Federal Deposit Insurance Corp. is insuring all deposits at Silicon Valley Bank and Signature Bank, disregarding the $250,000 cap. That has pushed other banks to ask for the same unlimited guarantee. Some midsize banks are asking the FDIC to explicitly guarantee all their deposits as well for two years.
Green stressed the actions of central banks around the world — and their coordinated actions, including a collateral debt facility at the Federal Reserve designed to give banks quick access to cash to cover deposits — has helped boost certainty and confidence in the markets.
He stressed the overall financial health of banks is solid and that the failures were specific to those banks.
Ed Moya, a senior market analyst with foreign exchange company OANDA, said the stock market risks won’t go away until investors are confident the Fed is done hiking interest rates.
“The banking system still doesn’t have any confidence as Wall Street tries to send yields sharply lower,” Moya said in a market note on March 20. “It looks like credit conditions will continue to tighten while monetary policy conditions are expected to loosen as the economy heads to a recession.”
The Federal Reserve has for nearly a year aggressively raised rates to cool inflation and tame what it viewed as a too-hot job market. But the rapidly raising rates exposed systemic weakness in several large banks. Meanwhile, the job market is still strong, with only a few signs of softening.
Now, experts are cautioning that additional rate hikes will cause more damage to the banking sector. And experts say there is likely to be regulatory scrutiny, lawsuits and federal investigations into what happened.
For small-business owners wondering what they should do with their money during the recent banking industry problems, we asked the experts here.
In support of Junior Achievement of Central Carolinas, join the CBJ for this live panel discussion with local businesses who will share how their company supports financial literacy in the Charlotte region. Tickets are complimentary.
The Charlotte Business Journal’s 2023 CFO of the Year Awards will be given to top local professionals for their outstanding performance in their roles as senior financial executives.
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