Update: It appears some have read the actual Fed data after all as regional banks are now red…
Even PACW is fading fast now (from +33% to +2%)…
Having rallied early after suspending their dividend in a statement released at 10pm on Friday night.
* * *
Regional bank stocks were soaring in early trading this morning prompting several talking heads to proclaim the end of the banking crisis and restating ‘there is nothing to fear but fear (and short-sellers) alone’.
There’s just one thing about the rebound.
According to Friday’s Fed data, deposit outflows continue (non-seasonally-adjusted), especially for small banks…
Source: Bloomberg
BUT Small Bank lending also soared… especially in CRE loans
Source: Bloomberg
Which (theoretically) pushed implied US commercial bank residual “equity” (assets minus liabilities) to record highs…
Source: Bloomberg
AND the drop in liabilities and rise in assets pushed ‘Small banks’ away from the red line of reserve constraints (on a seasonally-adjusted basis)…
Source: Bloomberg
Which may help explain the squeeze higher in some regional bank names…
The question is – do you buy it?
Do you believe in the miracle of Fed ‘seasonals’?
If you do, then the banking crisis is over and buying may make sense.
If you don’t and this magical difference between SA and NSA is not an artifact of taxes (well past due now) or historical patterns (which it wasn’t in January), then fade these bounces in regional banks as this is far from over.
Here’s a question:
During a bank run when billions of deposits are getting yanked each day, do you seasonally adjust the bank run?
Because that’s what the Fed did and here is the deposit data:
Seasonally adjusted: $12.5BN outflow
Actual: -$120BN, or 10x greater, outflow pic.twitter.com/31wGBuXF4m
— zerohedge (@zerohedge) May 5, 2023
Finally, we know some stress in the banking sector remains as there are still banks who are paying above the top of Fed’s range for fed funds, i.e. 5.25%, to borrow reserves.
As Bloomberg’s Simon White notes, discount window (DW) usage has fallen, but this has simply been transferred to the new BTFP facility, which has better terms than the DW.
It is thus evident some smaller lenders continue to face fundamental problems.
And one more thing…
anyone who says bank deposit flight can reverse while Fed is doing QT has zero idea how the financial system works pic.twitter.com/rcPFOIdOrz
— zerohedge (@zerohedge) May 8, 2023
Tyler Durden
Mon, 05/08/2023 – 12:40
