US regional bank shares bounce as debt ceiling overshadows crisis (updated)

First Republic Bank

15/05/2023 22:38

(New throughout, updates prices, adds background and analyst
quote)
    By Chibuike Oguh and Niket  Nishant
       May 15 (Reuters) - 
    Shares of U.S. regional lenders rose on Monday, led by a
rebound in PacWest Bancorp  PACW.O , as investors turned their
attention to the U.S. debt ceiling debate instead of the crisis
of confidence that has led to the collapse of three banks in two
months.
  
        Regional bank stocks have benefited as the market's
focus has shifted away from their problems and toward the debate
over raising the federal debt ceiling, said Ryan Detrick, chief
market strategist at LPL Financial in Omaha.
  
        "We survived the weekend without a major bank calamity
so there's some relief rally going on with regional banks
bouncing," Detrick said.
  
        PacWest Bancorp shares rose 17.6% but remained down 77%
year-to-date. Western Alliance Bancorp  WAL.N  rose 12% but was
still down 48% year-to-date. Comerica Inc  CMA.N  rose 7.3%,
Fifth Third Bancorp  FITB.O  was up 2.5% and KeyCorp  KEY.N 
added 6.7%. The KBW Regional Banking Index  .KRX  rose 3.2% but
remained down 36% year-to-date.  
  
        U.S. Deputy Treasury Secretary Wally Adeyemo 
    dismissed
     the idea of minting a platinum coin to avoid a U.S.
default, saying the only workable solution was for Congress to
raise the federal debt ceiling. Treasury Secretary Janet Yellen
also has rejected the idea of a platinum coin to skirt the debt
ceiling and fund government expenses.
  
        Hedge fund manager Michael Burry, who rose to fame with
his bets against the U.S. housing market before the 2008
financial crisis, 
    added positions
     in several regional banks during a tumultuous first quarter
for the sector, according to securities filings released on
Monday.
  
        Burry's Scion Asset Management’s positions included
150,000 shares in First Republic Bank  FRCB.PK , 250,000 shares
in PacWest Bancorp  PACW.O , 850,000 shares in New York
Community Bancorp  NYCB.N , and 125,000 shares of Western
Alliance Bancorp  WAL.N , filings showed. Burry's firm also
added a position in Wells Fargo & Co  WFC.N . The filings did
not specify whether Burry, widely known as "the Big Short"
investor, had shorted the stocks previously.
  
        By contrast, Bridgewater Associates, one of the world's
largest hedge funds, 
    sold off
     U.S. bank stocks in the first quarter as the industry was
roiled by a crisis sparked by the collapse of Silicon Valley
Bank, according to regulatory filings.
  
        The firm, founded by billionaire Ray Dalio, cut its
holdings to zero in five U.S. banking giants: JPMorgan & Co
 JPM.N , Bank of America Corp  BAC.N , Wells Fargo & Co  WFC.N ,
Goldman Sachs Group Inc  GS.N  and Morgan Stanley  MS.N . It
also roughly halved its exposure to Citigroup Inc, the filings
showed.
  
        Meanwhile, Greg Becker, former CEO of failed lender
Silicon Valley Bank, apologized in congressional testimony for
its "devastating" collapse while citing rising interest rates
and social media as key causes of its demise. 
  
        The bank was responsive to regulator concerns about its
risk management and working to address issues when an
"unprecedented" bank run led to its failure, Becker wrote in
prepared testimony published on Monday by the Senate Banking
Committee.
  
        Becker 
    will testify
     before the Senate Banking Committee on Tuesday alongside
Scott Shay and Eric Howell, the former chair and president,
respectively, of Signature Bank. Regulators 
    had closed Signature Bank
     on March 12 after it experienced liquidity issues following
SVB’s collapse two days earlier. First Republic Bank was the
third and largest bank failure since the 2008 financial crisis.
  

 (Reporting by Niket Nishant in Bengaluru and Chibuike Oguh in
New York; Editing by Arun Koyyur and David Gregorio)
 ((Niket.Nishant@thomsonreuters.com;))