The pressure is easing on regional banks in the US, but they are not out of the woods yet.
Western Alliance Bancorp, the Phoenix-based bank, said yesterday that deposits had risen by $3bn in the past few weeks as it reported first-quarter earnings.
Kenneth Vecchione, Western Alliance’s chief executive, told analysts that depositors were returning, not “dollar for dollar”, but they were coming back and he was confident of the outlook for deposits. He also said his company had been unfairly compared with Silicon Valley Bank in March because part of its business was lending to start-ups.
Western Alliance shares, which were hit hard during last month’s banking sector turmoil, closed 24 per cent higher. The update helped shares in First Republic and PacWest, two other regional banks, rise too.
But other local lenders were not as positive. Zions Bank and Citizens Financial both said deposits fell in the first three months of the year.
As well as deposit flight, the rising cost of paying depositors interest and the risk of loans souring is proving a risk for the sector.
Western Alliance said its cost of deposits in the first quarter rose 1,550 per cent to $232mn, from $14mn in the same period a year ago and it set aside $19mn for potential loan losses.
“You’re seeing deposit and funding costs really accelerate,” said analyst Chris McGratty, the head of US bank research at KBW. “They were accelerating before SVB and Signature. They’re only more acute now.”
Today it is the turn of Huntington Bancshares, Fifth Third Bancorp and KeyCorp to update investors on their first-quarter performance.
Here’s what else I’m keeping tabs on today:
Janet Yellen: The Treasury secretary will make US-China relations the centrepiece of a speech she plans to give in Washington.
Earnings: Blackstone, American Express, AT&T and Philip Morris report.
Economic data: We also get data on existing home sales for March and weekly claims for unemployment aid.
Monetary policy: Dallas Fed president Lorie Logan and Fed governor Michelle Bowman are due to speak, as are Cleveland Fed president Loretta Mester and Atlanta Fed president Raphael Bostic.
Five more top stories
1. Elon Musk indicated he was willing to sacrifice Tesla’s short-term profits in an aggressive push for market share. A series of price cuts this year has already lowered margins at the electric vehicle maker. Musk also had an unusual message for shareholders worried about the company’s falling profits.
2. Morgan Stanley yesterday was the last of the Wall Street banks to report and chief executive James Gorman was in a downbeat mood. He warned that investment banking revenues may not recover until next year. Read more on what he said here.
3. Kevin McCarthy outlined his plans for breaking the debt ceiling impasse, including capping government spending at fiscal year 2022 levels, clawing back unspent Covid-19 relief funds and repealing the Biden administration’s investments in the Internal Revenue Service. The proposal is almost certainly going to be rejected by Democrats.
4. Instagram is relocating most of its staff from London to New York, including Adam Mosseri, the social media platform’s head, who moved from California to London less than eight months ago. Read more on the shake-up at the photo app.
5. Dominion was “irreparably damaged” by Fox’s airing of false claims that its voting machines helped steal the 2020 US election, the company’s main investor told the Financial Times yesterday. Read the full interview with Hootan Yaghoobzade here.
The Big Read
With India set to surpass China as the world’s most populous country, its public digital infrastructure has become a core part of Prime Minister Narendra Modi’s efforts to present India as a nascent economic superpower and alternative investment destination to its neighbour. But the “India Stack”, its novel approach to integrate private and public digital services, has sparked worries over privacy and data protection.
We’re also reading . . .
Warring rivals: In separate interviews with the FT, Sudan’s battling generals branded each other “criminals” responsible for civilian deaths in remarks that suggest a bitter fight to the end.
Office surveillance: The technology of automated stress detection is intended to help individuals privately manage their own wellbeing, but it is not hard to imagine unintended consequences, writes Anjana Ahuja.
Bloomberg succession: Executives, rivals and clients reveal that the media company is pondering a future without its eponymous founder.
Chart of the day
Data released yesterday showed UK inflation fell less than expected and remained in double digits at 10.1 per cent last month, significantly higher than in the US and the eurozone. But the details and underlying trends also indicate that Britain is not the outlier that initial comparisons suggest.
Take a break from the news
Double Vanilla is a vlogger on street style who asks strangers to detail their looks — and asks them the price. On a trip to Paris, she interviewed a tourist wearing Tom Ford sunglasses, a Dior handbag, Chanel trainers and Van Cleef & Arpels jewellery and was able to reveal the not insignificant sum for her “walking around Paris with my daughter” outfit.
“People are always interested in seeing how much other people spend on their clothes,” Double Vanilla says.
Additional contributions by Tee Zhuo and Emily Goldberg
Source: Economy - ft.com
