Losses Top $165 Billion As Analyst Warns SVB Failure Risks Intense Regulator Scrutiny

Topline

The second and third-largest bank failures in U.S. history rattled investors’ confidence in bank stocks to the tune of tens of billions of dollars Monday, as the contagion fears from Silicon Valley Bank and Signature Bank’s weekend collapses spread across the industry—hitting regional banks particularly hard.

Monday was a chaotic day for Wall Street.

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Key Facts

The 10 largest bank stocks in the U.S. lost $50 billion in market capitalization Monday, driven by Charles Schwab and Truist Financial’s 11% respective nosedives as of 11:15 a.m. ET.

That grouping has lost $165 billion in market value since Wednesday, the last trading session before Silicon Valley Bank’s unraveling dragged down the wider market.

Though each of those stocks slid Monday, the impact was far greater among smaller bank stocks, as shares of regional banks First Republic, Western Alliance and PacWest fell 35% or more early Monday amid multiple halts on trading due to volatility.

In a Monday note to clients evaluating the market fallout of the current crisis, Bank of America analyst Ebrahim Poonawala slashed his price targets for 24 regional banks by an average of 24%, citing potentially higher compliance costs for the companies amid more intense regulator scrutiny.

Big Number

100%. That’s how many of the S&P’s 30 worst performers were financial stocks, according to FactSet data.

Surprising Fact

The bank losses briefly caused the S&P 500 to turn negative year-to-date, wiping out what was once a nearly 10% rally. The index recovered for a 0.8% gain Monday despite the banking rout, while the Dow Jones Industrial Average and tech-heavy Nasdaq notched 0.7% and 1.2% jumps.

Contra

“We believe some of the recent sell-off in banks has been overdone—especially in select universal banks, which remain well capitalized and sufficiently liquid to continue to serve clients,” Solita Marcelli, UBS Global Wealth Management’s chief Americas investment officer, wrote in a Monday note.

Key Background

The California Department of Financial Protection and Innovation closed Silicon Valley Bank on Friday after the institution was unable to meet withdrawal requests. The federal government swooped in Sunday to guarantee all individual and corporate depositors at the California bank would get their money back, a move deemed necessary by some to prevent a broader collapse in the banking industry and panned by others as yet another government parachute for a failing corporation. President Joe Biden said Monday he will ask lawmakers to increase federal banking regulations in the wake of the two high-profile failures.