Swedbank Strategist Says US Banking Crisis Is Spreading – According to a strategist from Swedbank, a Swedish bank headquartered in Stockholm, the U.S. banking crisis is expanding, as evidenced by several bank failures. The strategist specifically mentioned Pacwest Bank, Western Alliance Bank, and First Horizon Bank, which have all experienced financial meltdowns.
He reportedly said: “After Silicon Valley Bank, Signature Bank, First Republic Bank and now potentially Pacwest Bank, Western Alliance Bank, and First Horizon Bank all having been subject to financial meltdowns, the proverbial cat will be very difficult to put back into the bag.” Last week, regulators took control of First Republic Bank and JPMorgan Chase acquired most of its assets, making it the largest bank failure in the United States since 2008. In March, both Silicon Valley Bank and Signature Bank collapsed.
As a result of the seizure of First Republic Bank, the stock prices of various banks, including Pacwest and Western Alliance Bank, experienced a sharp decline. “It is hard not to see the irony of regional U.S. banks having successfully lobbied for less regulations during the Trump administration only to find that less regulations now is making them vulnerable to bank runs,” Magnusson opined.
The Swedbank strategist further cautioned: “The U.S. regional bank crisis is spreading. With every bank that succumbs to shrinking deposits and/or market distrust, the probability of more banks falling victim to similar fates grows. A vicious spiral may be about to take hold.” “A general risk-off reaction is becoming increasingly likely, and you should position for this risk,” the strategist concluded.
Despite multiple bank failures, Federal Reserve Chairman Jerome Powell stated that the U.S. banking system is “sound and resilient” as Fed officials raised interest rates by 25 basis points this week. The Federal Reserve recently revealed that 722 banks reported unrealized losses exceeding 50% of capital in the third quarter of 2022.