Bank Autopsy – Struggling Banking Earnings
In the past couple of weeks, we’ve been able to see how the top of the banking sector is doing with the big banks providing their quarterly results. There were some impressive results coming from JPMorgan and Citibank, while more was desired of Goldman Sachs, but it was generally shown that the large banking firms held their ground during the banking crisis. However, the regional banks were the ones that received most of the impact, and we got to see the direct effects on some of the companies that were hit the hardest.
First Republic Bank reported their quarterly earnings after the market closed on Monday, giving a greater look into the effects of the banking panic. Customers pulled out more than $100 billion in deposits last month after the collapse of SVB and Signature Bank, almost leading to a collapse of their own after years of thriving. Profit fell by 33 percent from the previous year to $269 million, and future earnings look bleak as the company had to take on expensive loans from the Federal Reserve and Federal Home Loan Bank after the deposit run. First Republic survived, and it now has a long way to go with the Federal Reserve’s rate decisions still in question.
Although not a regional bank, Credit Suisse was on the brink of collapse while being a systemically important bank until rival UBS came in and acquired them. During the fiasco, customers withdrew $75 billion in deposits, and their bad business deals came back to bite them as they lost $2 billion from them in the first quarter. In what will likely be a footnote in the future, Credit Suisse reported one of the largest profits in banking history this quarter as they wrote off $17 billion in bonds, which is unusual given the circumstances, and UBS will receive the benefits although this was expected.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.