Regional bank stocks continued to move sharply higher Thursday, as bank stocks headed for their strongest week in nearly 30 months. Regional banks led an industry rally on Wednesday, buoyed by a report from Western Alliance Bancorp that showed deposits increased by $2 billion so far during Q2.
The news from Western Alliance helped ease concerns about smaller lenders after Silicon Valley Bank's failure in March sent shock waves through the industry. Western Alliance stock led the surge following the late Tuesday announcement. In other banking news, former First Republic CEO Michael Roffler was to testify in front of House lawmakers Wednesday after Signature Bank and Silicon Valley Bank execs were grilled by the Senate Tuesday.
Western Alliance Update
Western Alliance noted it had about $50 billion in deposits as of May 12, improved from $47.6 billion at March 31. The Phoenix-based bank said deposits stabilized by March 20, then resumed their growth trajectory. Quarter to date, deposits are up more than $2 billion, the bank said.
In its previous May 11 update, Western Alliance said deposits had increased $1.8 billion from the prior quarter to $49.4 billion as of May 9. Insured deposits were up to 79% as of May 12 from 68% as of March 31.
Western Alliance also said it was making progress on repositioning its balance sheet. It says it's close to completing half of the sales for its $6 billion in loans that were reclassified to "held-for-sale" status in Q1.
Bank of America Global Research resumed coverage of WAL stock following the update. The company's business model was "more resilient than perceived," Bank of America said. The firm has a buy rating and 42 price target for Western Alliance stock.
Western Alliance denied unconfirmed reports from the Financial Times on May 4 that it hired advisors to explore strategic options, including selling part or all of its business. The bank called the reports "categorically false in all respects," and said it plans to explore legal options in response to the article.
First Republic, Signature, SVB Executives Testify
Former First Republic Bank CEO Michael Roffler testified in front of the House Subcommittees on Financial Institutions and Monetary Policy, and Oversight and Investigations, at 10 a.m. ET Wednesday. It marked the first time Roffler appeared publicly since regulators seized collapsed First Republic, then sold most of its assets to JPMorgan Chase on May 1.
"Up until the cataclysmic events of March 10 and the ensuing days ... First Republic was in a strong financial position," Roffler said in a prepared statement. But "everything changed overnight," as the bank "was contaminated" by the panic contagion from Signature and Silicon Valley Bank failures, he wrote, noting "we could not have anticipated" the developments.
"Despite herculean efforts by my incredible colleagues at First Republic ... investor and depositor confidence never recovered," Roffler wrote.
Signature Bank and Silicon Valley Bank executives were grilled in front of the Senate Banking Committee Tuesday. It was also the first time the banks' top brass spoke publicly since their failures.
Lawmakers on both sides of the aisle blamed officials for mismanagement and ignoring "glaring risks" leading up to their respective collapses. Former SVB CEO Greg Becker apologized to employees, clients and shareholders in his testimony. Becker said the bank was caught off guard as the Fed raised interest rates over the past year, leading to a sharp decline in security values.
Becker blamed the inflation bubble, believing it was only transitory based on messaging from regulators. Fed officials called it a "textbook case of mismanagement" for ignoring red flags. SVB also paid bonuses to employees hours before its collapse, which the Fed is investigating.
Signature Bank executives told lawmakers regulators acted too quickly to seize the bank. Chairman Scott Shay said Signature was in a "strong position to weather the storm."
FDIC To Assess Big Lenders
Meanwhile, the Federal Deposit Insurance Corp. announced Thursday it plans for big banks to contribute funds to recover most of the losses to the deposit insurance fund after the bank failures. The FDIC estimates Signature and Silicon Valley Bank cost the Deposit Insurance Fund $15.8 billion.
Under the proposal, 113 banks will be subject to the special assessment. Organizations with more than $50 billion in total assets will pay more than 95% of the special assessment. Firms with less than $5 billion in assets won't be included in the assessment as the regulator replenishes its coffers.
Western Alliance Sparks Bank Rally
WAL stock moved 1% higher Thursday after surging 3.6% in premarket action. Shares spiked 12.8% Wednesday following the update. The stock is still down 41% so far this year following the bank turmoil.
PacWest Bancorp stock climbed 5% Thursday after leaping 10% in early trading. Shares rallied more than 17% Wednesday.
Comerica shares advanced 1.8% while Zions Bancorp stock rose 4%.
The SPDR S&P Regional Banking ETF edged higher Thursday, after surging 6.3% on Wednesday. The ETF is up 9.7% for the week, its best gain since Jan. 2021.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
