US Bank Stocks Hit Hard by SVB, Rebound in a Day... "Relief Rally"

Regional bank stocks, which were hit hard by the bankruptcy of Silicon Valley Bank (SVB) in the United States, collectively rebounded in just one day. First Republic Bank, which was rumored to be the 'second SVB' amid crisis concerns, surged about 27%. The market instability eased somewhat due to regulatory intervention, leading to what is being called a 'relief rally.'

On the 14th (local time) at the New York Stock Exchange, a broad rebound in regional bank stocks, including First Republic Bank, was prominent. First Republic, which had plunged 62% the previous day, closed trading up 26.98% from the previous session. It also showed gains in after-hours trading, rising by more than 10%. PacWest Bancorp rose 33.85%, Western Alliance Bancorp increased 14.36%, and KeyCorp jumped 6.94%. These small- to mid-sized regional banks had seen their stock prices plummet the day before amid concerns that the SVB crisis could spread liquidity contagion.

Large banks such as Wells Fargo (+4.58%) and Citigroup (+5.95%) also rebounded in unison. Charles Schwab surged more than 9% after its CEO announced that the company had purchased shares that day and that large inflows of customer deposits were continuing. The S&P Regional Banks Exchange-Traded Fund (ETF) rose more than 2%. John Meyer, Chief Investment Officer (CIO) of Global X, commented, "Regional banks are recording significant gains, which is reassuring the market." Fueled by the bank stock rally, the three major indices of the New York Stock Exchange all closed up between 1% and 2% that day.

This rebound is interpreted as a result of the rapid easing of financial market instability caused by the bankruptcies of SVB and Signature Bank, thanks to regulatory intervention. Wall Street experts emphasize that this situation differs from the 2008 global financial crisis and draw a line against the possibility of liquidity contagion. The February Consumer Price Index (CPI), released before the market opened that day, met expectations without any major surprises, providing reassurance to investors. Adam Turnquist, Senior Technical Strategist at LPL Financial, said, "There is no big surprise in the CPI. Since there are no surprises in the banking sector either, this can be called a relief rally," adding, "The market is welcoming this."

However, caution regarding the aftermath of SVB's bankruptcy continues. Moody's, an international credit rating agency, downgraded the outlook for the entire U.S. banking system from 'stable' to 'negative' on the same day, reflecting the impact of SVB's bankruptcy. Moody's stated in a report, "This adjustment reflects the deposit withdrawal incidents at SVB, Silvergate Bank, and Signature Bank, as well as the rapid deterioration of the operating environment following the bankruptcies of SVB and Signature Bank." This move followed Moody's warning the previous day that it would downgrade or review the credit ratings of seven banks, including First Republic.

Moody's expressed concerns that despite federal government measures to contain the fallout from SVB's bankruptcy, other banks with unrealized securities losses and uninsured depositors not covered by protections could still be at risk. It also noted that the situation of these banks could worsen further as the Federal Reserve prolongs tightening to reduce inflation. Julian Emanuel of Evercore ISI mentioned the rebound of regional bank stocks in the New York Stock Exchange that day but warned, "It is uncertain how long this movement will last."

The U.S. Department of Justice and the Securities and Exchange Commission (SEC) have launched full-scale investigations related to SVB's bankruptcy. According to the Wall Street Journal (WSJ), the individual investigations by the Department of Justice and SEC are still in preliminary stages. The investigation includes controversies surrounding the sale of shares by SVB Financial, SVB's parent company, before the bankruptcy. It is also expected that authorities will investigate whether the management accurately informed customers and investors in advance about potential financial risks and business uncertainties.

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