Bank stocks look to recover as investors eye Fed decision
Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss bank stocks and how they are trading ahead of the Fed’s rate hike decision.
BRAD SMITH: Let's check in the latest market action in the banking sector as well. Investors are looking ahead to today's Fed decision. And we've got even more of this movement that's taking place in the regional banks. You flagged PacWest Bancorp as well. And we're seeing that move lower here pre-market by about 8%.
JULIE HYMAN: Yeah, although the company said it secured some cash from a financing facility, $1.4 billion in cash. It's got a financing facility from ATLAS SP Partners. Maybe what's weighing on the bank is that at the same time, it's making an announcement that its deposits fell by 20%, and it had been trying separately to raise capital in different ways, and that that is not working out. So I suspect that is what's going on here and why the stock is trading so much lower in pre-market trading, despite raising some capital or getting financing in a different way here.
BRAD SMITH: Yeah, $3.7 billion borrowed from the Federal Home Loan Bank System, and then $10 and 1/2 billion from the Federal Reserve's discount window, plus $2.1 billion in bank term funding program. That was as of March 20. And so investors are going to continue to have to look at the injections of capital is that-- the injection of capital, rather, that needs to come post-textbook bank run for not just First Republic that we had seen, for PacWest, and then additionally for Silicon Valley Bank that led to its own collapse.
These are bank runs where you see an extreme and volatile volume of the amount of deposits that come forward, and then essentially thereafter it's just a matter of, OK, do we have enough cash for our day-to-day, any type of deposits or withdrawals that we might be exposed to as well, and being able to cash in on those.
JULIE HYMAN: Right. And part of the question is, where is that money going, right? There's some concern, guests we've talked to, saying if it goes to bigger banks, than are those bigger banks even bigger, and is that more of a systemic risk? But some of it must undoubtedly be flowing to small-- other small banks as well.