Shares of regional US banks rose after the Western alliance announced deposit growth

(Reuters) – Shares of US regional lenders jumped on Wednesday as investors grew more confident that the worst of the banking crisis may be over after news of strong deposit growth at Western Alliance Bancorp (WAL.N).

The bank said on Tuesday that deposits at Western Alliance grew by more than $2 billion in the three months through May 12, indicating that customers remained confident in its financial health after the failure of three regional lenders in recent months: Silicon Valley Bank, Signature Bank and First Republic Bank. .

The disclosure of deposit growth at Western Alliance was good news for nervous investors, said Arthur Hogan, chief market strategist at B. Riley Wealth.

“Western Alliance, one of the hardest hit banks, came out with a deposit showing increased deposits. And as these banks start to show that deposits have leveled off, more confidence is being rebuilt in the space in general,” Hogan said.

Western Alliance shares, which are down 41% year-to-date, rose 10% to $34.81, erasing losses posted over the past two weeks. Other regional lenders closed higher: PacWest Bancorp (PACW.O), whose stock has lost nearly 76% of its value year-to-date, is up 22%. Comerica Inc (CMA.N) rose 12.3%, Zions Bancorp (ZION.O) increased 12%, and KeyCorp (KEY.N) increased 8.6%.

The KBW Regional Banking Index (.KRX) rose 7.3%, jumping to its highest level since May 1st.

“We are not going back to pre-crisis levels anytime soon as we know the regional bank earnings environment will remain subdued, but the emergency period appears to be fading and there is more focus on fundamentals,” Hogan added.

A screen displays the logo and trading information for Western Alliance Bancorporation on the floor of the New York Stock Exchange (NYSE) in New York City, US, March 14, 2023. REUTERS/Brendan McDermid

Lindsey Johnson, president and CEO of the Retail Banking Lobby Group, said in a speech at the Treasury Club conference in Washington, D.C., on Wednesday.

“We call on policymakers to join our industry to help re-establish consumer confidence in our financial system and stability across the market,” Johnson said.

Regional banks, the largest lenders to the beleaguered US commercial real estate and construction markets, have reduced their exposure to the sector by tightening standards and offering fewer loans, according to a Reuters analysis.

Many mortgage borrowers are facing challenges making interest payments in an environment of rising prices, while office utilization has fallen during the pandemic and property values ​​have plummeted due to recession fears.

Deposit flows at US banks, including regional lenders, rose to $17.16 trillion in the week ending May 3, marking the first increase in four weeks, according to Federal Reserve data.

Former First Republic Bank CEO Michael Roeffler blamed the bank’s collapse on contagion from the failures of other regional banks, and said regulators had not expressed concerns about the bank’s strategy, liquidity or management performance.

A total of more than $100 billion in deposits have been withdrawn from the bank in recent weeks, a time of industry-wide panic about the safety of regional banks, Roffler said in prepared testimony to be delivered at a hearing of the US House Financial Services Subcommittee. .

Additional reporting by Nikit Nishant in Bengaluru; Editing by Devika Siamnath

Our Standards: The Thomson Reuters Trust Principles.

Chibuike Oguh

Thomson Reuters

Chibuike reports on large private equity firms based in the US, including Blackstone, KKR, Carlyle, and Apollo. Previously at Bloomberg News, he holds master’s degrees in journalism from New York University and Edinburgh Napier University. Contact: 332-999-6154

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