By Noel Randewich and Caroline Valetkevitch
(Reuters) -Shares of U.S. banks extended recent losses on Friday, with regional banks hit hardest, as SVB Financial Group’s failure reverberated across the financial industry.
A California banking regulator closed SVB, putting the tech-heavy lender into receivership in the largest bank failure since the 2008 financial crisis.
The state regulator appointed the Federal Deposit Insurance Corp (FDIC) to dispose of SVB’s assets in an episode that spilled over into other U.S. and European banks and sparked fears about hidden risks.
While SVB’s stock was halted on Friday, shares of other mid-sized U.S. banks added to recent, heavy losses. The S&P 500 regional banks index dropped 4.3%, bringing its loss this week to 18%, its worst week since 2009.
U.S. banks have lost over $100 billion in stock market value in two days, with European banks losing around another $50 billion in value, according to a Reuters calculation.
SVB’s crisis comes as the U.S. Federal Reserve, locked in a battle against inflation, is raising interest rates and ending an era of cheap money. Investor fears about an aggressive rate hike at the Fed’s next meeting later this month were eased on Friday by signs of cooling wage growth in the February jobs report.
The S&P 500 banks index, which includes all banks in the benchmark index, dipped 0.5% leaving it with a weekly loss of about 11%, its biggest weekly decline since the global market meltdown in March 2020 following the start of the coronavirus pandemic.
“There are obvious cracks in the system, and the worry is if the Fed raises rates (more than expected) in two weeks, will that break something in the banking system? That’s why the banks are selling off and the market is nervous,” said Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma.
Signature Bank dropped about 23%, while San Francisco-based First Republic Bank fell 15%.
Among other regional banks getting hit hard, shares of Western Alliance Bancorp tumbled 21% and PacWest Bancorp dropped 38% after those stocks were halted several times due to volatility. Charles Schwab slumped over 11%.
Bank of America fell 0.9%. JPMorgan & Chase, the most valuable U.S. bank, rebounded 2.5%, but lost about 7% for the week.
(Reporting by Noel Randewich in Oakland, Calif. and Caroline Valetkevitch in New York; Editing by Leslie Adler and David Gregorio)
