US regional bank stocks fall after Yellen says more bank mergers necessary

First Republic Bank

19/05/2023 18:41

NEW YORK, May 19 (Reuters) - Shares of U.S. regional
lenders fell on Friday after CNN reported that U.S. Treasury
Secretary Janet Yellen told bank chief executives that more
mergers may be necessary following a series of bank failures.
    Yellen also reaffirmed the strength and soundness of the
country's banking system at the meeting with bank CEOs on
Thursday in the aftermath of the collapse of Silicon Valley
Bank, Signature Bank, and First Republic Bank.
    The KBW Regional Banking Index  .KRX  fell 3%, with shares
of PacWest Bancorp  PACW.O  and Western Alliance  WAL.N  among
the biggest losers as they shed 4% each. Comerica Inc  CMA.N 
was down 3%, Zions Bancorp.  ZION.O  fell nearly 5%, and Valley
National Bancorp  VLY.O  dropped 5.2%.
       The regional bank crisis has been partly blamed by some
on aggressive interest rates by the U.S. Federal Reserve, which
forced some lenders to seek new capital to make up for a fall in
the value of assets linked to interest rates.
  
       Fed Chairman Jerome Powell said on Friday the
after-effect of recent banking sector troubles is expected to
take some pressure off the U.S. central bank's interest rake
hiking cycle.
  
        Tighter credit conditions meant that "our policy rate
may not need to rise as much as it would have otherwise to
achieve our goals," Powell told a central bank conference in
Washington.
  
    But Tom Plumb, portfolio manager at Plumb Balanced Fund,
said he doesn't expect the Fed to start lowering interest rates
anytime soon as the U.S. economy is still showing signs of
strength and inflation is not abating as quickly as expected.
    "People thought that inflation was going to come down faster
and that the pressure on these regional banks and those failures
were leading to this narrative that the Fed was going to lower
interest rates by the end of this year. I don't think that's the
case," Plumb said.
    An agreement on raising the U.S. debt ceiling is still
possible if both Republicans and Democrats negotiate in good
faith and recognize they won't get everything they want, a White
House official said on Friday shortly after an impasse in talks
was reported. 
   The debt ceiling dispute has weighed on market sentiment,
including for regional bank stocks. 
    "Unfortunately, the way our government works they are going
to take you to the brink and they're going to cause a
significant last wave of panic. And then they will come up with
some type of resolution," Plumb added.
        
  
   

 (Reporting by Chibuike Oguh in New York, editing by Deepa
Babington)
 ((Chibuike.Oguh@thomsonreuters.com; +332-219-1834; Reuters
Messaging: chibuike.oguh.thomsonreuters.com@reuters.net))