First Republic stock price closed the session down by 62%, while Western Alliance Bank tumbled an unprecedented 47% along with Dallas-based Comerica bank that fell 28%. Nasdaq listed PacWest Bancorp went down by 21% after dropping more than 50% during the day. The KBW Regional Banking Index fell 7.7%, the most since June 2020, making US regional banks among the hardest hit. Dow Jones U.S. Banks Index went down by 7% while the Nasdaq Bank Index cracked 10%.

To make the matter worse for the US regional banks, Moody’s Investors Service has placed First Republic Bank and five other US lenders like Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp., and Comerica Inc. on review for downgrade.

This is the latest sign of concern about the health of regional financial firms in the aftermath of Silicon Valley Bank’s failure. Concerns were raised by the credit rating agency about the lenders’ reliance on uninsured deposit funding and unrealized losses in their asset portfolios.

On Tuesday, most of these banking stocks that were battered yesterday are quoting with big gains of above 25%.
The meltdown in banking stocks came a day after the US authorities gave a life-line to the depositors of Silver Valley Bank (SVB). By backstopping all depositors of SVB, including the insured depositors, the Fed wanted to send a signal to the markets that all-is-well. Still, the fear of contagion spreading across banking sectors may be the reason for the stock price of several US regional banks plunging heavily on Monday.

“Globally, the crisis in the US banking system has roiled markets with the banking sector coming under pressure across markets on fears of contagion. Markets are concerned over the health of the financial system. The collapse of Silicon Valley Bank following losses in its bond portfolio, has prompted the biggest bank failure since the global financial crisis and sending shockwaves through the banking sector. The markets will closely track the macroeconomic data as well as the unfolding crisis in the US banking system,” says Mitul Shah, Head of Research – Institutional Desk, Reliance Securities Ltd.

Some investors are finding opportunity in the banking stocks carnage. In a recent tweeter message, Bill Ackman, CEO Pershing Square, a hedge fund management company, tweets –

“Our economy will not function effectively without our community and regional banking system. Therefore, the FDIC needs to explicitly guarantee all deposits now.

Regional bank stocks are an incredible bargain now as long as the gov’t does the right thing, and I am confident it will.

This means that one of the great trades would be to buy regional bank stocks or ETFs here. And the massive decline in rates makes this an even better investment now.

I would be surprised if Warren isn’t putting capital to work in his favorite regional banks now.”