Not so fast, Jamie.
“This part of the crisis is over,” JPMorgan CEO Jamie Dimon said to start the week in an analyst call after taking over First Republic in an FDIC auction.
Dimon said there’s a chance “another smaller” bank fails, but “this pretty much resolves them all.”
The market is trying to make a liar out of him. Shares of Metropolitan Bank are down 21% today, PacWest Bancorp down 17% and Western Alliance down 16%.
Metropolitan and PacWest are both at the lowest levels since the panic bottom on March 13.
The KRE regional bank index is down nearly 4% today and below the March 13 low as losses broaden.
It's unclear what the catalyst for the latest leg down is. It could be short-term buyers taking profits or getting blown out while hoping for a rebound. There's also a lack of any segment of would-be buyers as uncertainty plagues the sector due to fears about commercial real estate and hold-to-maturity loans. We could simply be seeing multiples compress on regional banks.
The fear is that this leads to another round of deposit flight and puts the FDIC in a bind. Like Dimon, many thought that FRC would be the end of the regional banking crisis. After today's price action, no one should be so sure.
In all, the market is sending a powerful message to the Fed today and it's a strong pushback against the surprise hike from the RBA. It may mean that if the Fed isn't a bit more explicit about heading to the sidelines at tomorrow's FOMC meeting, then there could be more kicking and screaming.
Update: The pain in regional banks is expending with the KRE now down 6.3%, led by PACW, now down 34%.
I wonder if the market is signalling here that access to capital is going to be severely curtailed.
