Shares of banks and other financial institutions rallied as fears of a First Republic Bank failure, and a domino chain of collapses, were alleviated by reports about planned interventions.
First Republic rallied by almost 30% after reports that JPMorgan Chief Executive Jamie Dimon was leading talks among banking chiefs about a rescue plan for the bank.
Treasury Secretary Janet Yellen told an audience at an American Bankers Association meeting that the U.S. stood ready to assist depositors in smaller banks. That cleared up confusion about the government's contingency plans, said one strategist.
"50% of industrial loans come from small, mid-size and community banks, 60% of mortgages come from small, mid-sized and community banks," said Quincy Krosby, chief global strategist at brokerage LPL Financial.
Previous statements from Ms. Yellen and others in the administration had created "the notion that what's more important are the larger money centred banks, and so you had money coming out of those smaller institutions and going towards the money centred banks." Another strategist said the current banking panic would be easier to contain than the last one.
"I don't think it's like 2008," said Brent Schutte, chief investment officer at money manager Northwestern Mutual Wealth Management. "To me, this has been more about a mismatch of assets and liabilities rather than quality of assets ... the reason why some of those banks failed was their customer base which was non diversified, then they owned longer term bonds (they) had to sell for shorter term needs, which caused losses and (a) crisis of confidence."
The SPDR S&P Regional Banking ETF rose by almost 6%, the largest increment since January 2021.
Write to Rob Curran at rob.curran@dowjones.com
(END) Dow Jones Newswires
03-21-23 1735ET
