U.S. bank stocks fell Thursday for the fourth straight day amid talk of higher interest rates and increased capital requirements by regulators to strengthen the banking system.
The stocks fell as Martin Gruenberg, chairman of the Federal Deposit Insurance Co., said U.S. regulators may lower the threshold for Basel III capital requirements to institutions with $100 billion in assets, down from $250 billion.
Investors were also digesting relatively positive comments from Federal Reserve Chairman Jerome Powell that U.S. inflation could cool without a large increase in the unemployment rate.
Eighty-eight out of 89 components of the SPDR S&P Bank ETF
KBE,
were down, while the overall index was lower by 2.4%.
And 138 out of 139 components of the SPDR S&P Regional Banking Index
KRE,
were down while the overall index was lower by 2.7%.
Finally, 66 out of 72 components of the Financial Select Sector SPDR ETF
XLF,
were moving lower, while the overall index was down by 0.9%. JPMorgan Chase & Co.
JPM,
stock was down 1.5% and Goldman Sachs Group Inc.
GS,
was lower by 1.1%.
The two banks are components of the Dow Jones Industrial Average
DJIA,
which was down by about 0.1%. Bank of America
BAC,
was off by 1.2%.
While banks are starting to show signs of normalization after several regional bank failures in early 2023 and monetary policy evolves, Fitch Ratings said U.S. and Canadian banks will face “formidable, albeit manageable headwinds in the second half of the year.
“Negative rating actions are on the rise, as seen following the collapse of Signature Bank, Silicon Valley Bank and First Republic,” Fitch said.
Bank rating activity is still expected to tilt toward affirmations despite the credit quality downturn, Fitch said.
“U.S. and Canadian banks will face formidable, albeit manageable, headwinds in the second half of 2023,” the debt rating firm said.
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