A strategic analyst at Swedbank, a Swedish bank, warned of the spread of the regional banking crisis in the United States. After numerous bank failures, he stressed that Backwest Bank, Western Alliance Bank, and First Horizon Bank were all “subject to financial meltdowns”.
Swedbank talks about the spread of the American banking crisis
Per Magnusson, a fixed-income analyst at Swedbank, a Stockholm-based Swedish bank, warned of the spread of the US banking crisis. It said He said:
After Silicon Valley Bank, Signature Bank, First Republic Bank and possibly now Pacwest Bank, Western Alliance Bank and First Horizon Bank all suffered financial meltdowns, it’s going to be very difficult to get the proverbial cat back in the bag.
Last week, regulators seized First Republic Bank and sold most of its assets to JPMorgan Chase. It was the biggest US bank failure since 2008. Silicon Valley Bank and Signature Bank collapsed in March. After the takeover of First Republic Bank, the shares of several banks fell, including Pacwest and Western Alliance Bank.
“It’s hard not to see the cynicism of regional US banks that successfully pushed for less regulation during the Trump administration only to find that less regulation now makes them vulnerable to banking threats,” Magnuson said.
As the Swedbank strategist warned:
The US regional banking crisis is spreading. With each bank subject to deposit shrinkage and/or market distrust, the likelihood of more banks falling victim to a similar fate increases. There may be a vicious spiral about to take hold.
The strategist concluded, “The general reaction to aversion to risk is becoming increasingly likely, and you must take an appropriate attitude to this risk.”
Despite multiple bank failures, Federal Reserve Chairman Jerome Powell stated that the US banking system is “sound and resilient” as Fed officials raised interest rates by 25 basis points this week. The Federal Reserve recently revealed that 722 banks reported unrealized losses of more than 50% of principal in the third quarter of 2022.
Do you agree with the strategist at Swedbank that the US banking crisis is spreading? Let us know in the comments section below.
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