Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

More US banks under pressure as Fed faces rate hike backlash

More US banks under pressure as Fed faces rate hike backlash

PacWest has seen its share price hammered by 90% since the start of the US banking turmoil while other major regional lenders are also in the firing line.
Another US regional lender has revealed talks to shore up its finances and a further has had its share price was clobbered amid the crisis of confidence to hit the country's banking sector.

Three lenders - Silicon Valley Bank, Signature Bank and First Republic - have failed this year on the back of balance sheet pressure caused by rising interest rates that have hit the value of their bondholdings.

Regional lenders have seen their share prices come under further pressure this week as investors seek out signs of any weakness.

First Republic was bought by Wall Street's largest bank JPMorgan on Monday after it failed to recover from a $100bn deposit flight in March.

LA-based lender PacWest Bancorp saw its shares decline by more than 50% on Wednesday - taking its market value loss to 90% during the crisis to date.

They were down a further 30% in Thursday's pre-market trading after it revealed talks with potential partners and investors about its "strategic options" despite a sizeable cash injection that was agreed at the start of the industry crisis.

Shares were down more than 40% when markets opened on Thursday morning in the US.

The bank said that while it had not experienced any unusual deposit outflows since the sale of First Republic, it was normal for the company and its board of directors to "continuously review" those options.

"Recently, the company has been approached by several potential partners and investors - discussions are ongoing," its statement said.

"The company will continue to evaluate all options to maximise shareholder value."

The options could include a sale or capital raising, the Reuters news agency reported citing a source.

Other regional lenders have seen their share prices hammered in recent days.

Arizona-based Western Alliance lost 23% of its market value on Wednesday despite insisting it had not experienced any unusual deposit outflows and had adequate liquidity.

Its losses deepened on Thursday as much as 62% with trading halted at multiple points through the morning.

There are fears the crisis of confidence will hurt the availability of credit in the US economy, already tipped by economists to enter recession this year.

Ten consecutive rate hikes imposed by the US Federal Reserve to keep a lid on inflation have been blamed for the banking sector's woes.

The Fed raised its main rate by a further quarter point on Wednesday night despite the banking turmoil and economic slowdown.

It did, however, give a hint that the rise would be the last for a while as it digested the impact of its tightening cycle.

There is still a "growing concern that the rapid pace" of higher interest rates has undermined the foundations of some mid-sized US banks, the head of financial analysis at AJ Bell said.

"Hardly household names with global investors until the last few months, now every ear is straining to catch the sector's next distress call."

"Banking stocks have taken another beating today as markets worry that PacWest might be the next domino to fall.

"Even if [the PacWest] alarm proves to be a false one, the implications for the global economy could be huge," Danni Hewson said.

"Reluctance to lend from a nervous sector which is battening down the hatches could mean that dreams of a softish landing become recession-filled nightmares."

One critic of the Fed response, the boss of financial advisory and asset management firm deVere Group, said the US central bank had failed at every hurdle since the inflation problem first surfaced.

Nigel Green said it had risked a longer-term recession through the latest rate hike.

"Clearly, this would not only be a huge issue for the US, but the global economy too," he warned.

"First, the crisis within the US financial system is still not over. There remain serious and legitimate concerns that after a string of bank failures, there could be more to come.

"The turmoil from the banking crisis is leading to a drop in bank lending, tightening the credit conditions for households and businesses. In turn, this will inevitably lead to a slowdown in economic activity and hiring.

"Chair Powell himself has said at a news conference that the bank turmoil had the equivalent impact of at least one quarter-point rate increase."
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×