When mega-banks invested in First Republic Bank (FRC), it only temporarily halted the panic. After FRC posted quarterly results,
management hosted a brief conference call and refused to answer any questions. The $100 billion in customer withdrawals sealed the firm’s fate.
On the weekend of April 28, 2023, the FDIC brokered JP Morgan (JPM) to buy FRC. This set a risky precedent. Regulators excused JP Morgan from current rules that let banks hold too many customer assets.
Last week, speculators bet that PacWest (PACW) would fall next. The stock fell as low as $2.48 before closing at $5.76. Risk takers earned 81.7% on May 5 and deservedly so. PACW may manage through the regional bank crisis.
PacWest needs to manage the risk of its commercial real estate debt.
The market unfairly attacked KeyCorp (KEY), which erased most of last week’s losses. Truist Financial (TFC) also fell as low as $25.56 before snapping back to $28.69. Both firms have attractive valuations.
TFC and KEY stocks are worth considering. Shareholders should expect both companies to avoid FRC’s fate. Customers will renew their confidence in the banks, deciding not to withdraw funds. This will put an end to the sell-off in regional banks.