📈Banks needs a solution before..
Banks need a solution to the confidence problem before more depositor panic sets in. Regional banks are under massive pressure as the deposit rates do not match what investors can get in short term treasuries or money market accounts. Add on possible bank runs and this can speed up quickly. We have already seen Silicon Valley Bank (SIVB) and Signature Bank (SBNY) fail. They were on the more riskier end of the spectrum.
The plot chart above was put together by Michael Burry who was made famous in the movie “The Big Short.” Currently banks have unrealized losses on the balance sheet because they buy treasury bonds. The bonds are dropping in value at a rate we have not seen in U.S. History. The bonds are solid and the losses unrealized as the banks do not have to sell as long as their capital requirements are met. Here in lies the problem. On the y axis of the plot graph we see deposits on a percentage basis that are above $250,000. That number is significant because that is the amount the FDIC insures depositors for. Banks with the largest losses and highest percentage of deposits over the threshold are on the top right of the chart. We can see how SIVB and SBNY fit in. The most reasonable assessment is that the bottom left would house the banks with the least amount of risk currently.
MTB is sitting right on a major multidecade support level. For a more in-depth look into the banking sector and what to expect next week watch the video below. In the video pay close attention to the sector and names that are making 52 week highs.
Wishing Everyone Massive Success in 2023 🍾