Regional banks including PacWest Bancorp (NASDAQ: PACW), Western Alliance Bancorp. (WAL), Comerica (CMA), and Zions Bancorp (ZION) were on a sharp downward trajectory in pre-market trading on Wednesday and overall, regional bank stocks are hitting new lows after the collapse of FRC and even as JP Morgan came to its rescue.
Investors have been spooked by FRC’s collapse as this was the third mid-sized U.S. bank to fold after Silicon Valley Bank and Signature Bank in early March. They have been left wondering if a broader contagion is on the cards even as expectations are high that the U.S. Fed could raise interest rates again ahead of its decision later today.
According to a CNBC report, economists are of the opinion that the era of higher inflation and more financial instability is here to stay. Karen Harris, managing director of macro trends at Bain & Company, told CNBC, “People haven’t pivoted to this new era, that we have an era that will be structurally more inflationary, a world of post-globalization where we won’t have the same scale of trade, there’ll be more trade barriers, an older demographic that means that the retirees who are savers aren’t saving the same way.”
The decline in regional banking stocks has also pulled down the SPDR S&P Regional Banking ETF (KRE) which has fallen by more than 30% in the past three months alone.
