The mass flight of capital out of the US banking system is witnessing an abrupt reversal.
In the last two weeks, depositors have added $133.16 billion to American bank accounts as panic over the safety of the system subsides.
In the last week alone, customers piled $46.58 billion into US banks, according to fresh data from the Federal Reserve Economic Data (FRED) system.
The inflows have coincided with a rebound in regional banking stocks, with shares of PacWest Bancorp bouncing from $6.45 on May 31st to $8.53 at time of publishing.
Increasing optimism in the banking sector is buoyed by a potential pause on interest rate hikes from the Federal Reserve.
According to the CME’s FedWatch tracker, 70.1% of investors believe the Fed will leave rates alone for the first time since March of last year.
Despite the short-term recovery, the overall health of American banks remains in question.
In the past week, Treasury Secretary Janet Yellen warned that further “consolidation” in the banking sector is likely amid troubles in the commercial real estate sector.
“We’ve seen such a big change in attitudes and behaviors toward remote work. And especially in an environment of higher interest rates. I think banks are broadly preparing for some restructuring and difficulties going ahead…
There is motivation to see some consolidation and it wouldn’t surprise me to see some of that going forward.
My overall read is that the level of capital and liquidity in the banking system is strong and while there will be some pain associated with this, the banks should be able to handle the strain.”
According to a February report from the Fed, more than 700 American banks have self-reported unrealized losses that exceed 50% of their capital.Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
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