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Quote of the Day
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“He with the most who is content with the least”
- Diogenes
The Big Idea
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🏦 Regional Banks Stabilize
Not too shabby: With the release of 2Q23 earnings data, many investors expected the worst from regional banks, but these concerns didn’t come to fruition this past week.
Key players: Many banks, including KeyCorp, Western Alliance Bancorp, and Zions Bancorp, all posted sharp profit declines. But their deposits remained stable or even higher compared with 1Q23 metrics. Stabilization of deposits comes as a relief for the banking industry following a strong wave of customers withdrawing deposits for higher yielding investment options.
Heard on the street: Bruce Van Saun, CEO of Citizens Financial Group - “I think confidence in the system has been restored somewhat, but I still think we’re in a challenging environment.”
Why the relief: Banks, especially regional banks, rely heavily on their low cost deposits to offer loans and grow their business. However, following the collapse of three regional banks in early March, banks had to shell out more interest to keep depositors around in the second quarter. The rapid rise in payments to depositors has eaten into profits, especially at Main Street banks, which typically don’t have a large array of fee-based business, like wealth management, compared to larger Wall Street based banks.
Source: Wall Street Journal
Daily Scoop
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✈️ Heat Wave Hits Airlines
Too hot to handle: High temperatures hitting parts of the U.S. are forcing airlines to adjust operations is some of the hardest-hit cities by reducing fuel or baggage and, in some cases, shedding passengers to help aircraft operate.
Why reduce baggage and passengers: High temperatures make air less dense, reducing engine performance and the amount of lift produced at a given speed. That generally means lower takeoff weights and longer takeoff distances are needed to produce sufficient lift. As a result, carriers are having to reduce pounds on the planes
Source: Bloomberg
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👋 Flagstar’s New Strategy
Picking up the pieces: Flagstar, the operating banking unit of New York Community Bank, which purchased Signature Bank back in March recently announced a new strategic push. The bank issued a statement announcing the hiring of at least 50 bankers from First Republic, which also failed this past March.
What they’re saying: “These six teams are regarded as among some of the best in the industry. The fact that they opted to join Flagstar is a testament to our business model and strong reputation in the marketplace,” CEO Thomas Cangemi said Thursday in a release. “At First Republic, these teams attracted both deposits, especially non-interest-bearing deposits, as well as loans, and we look forward to their clients banking with our Company.”
Source: Banking Dive
Brief Bullets
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No more bear market: After nearly 20 months since its beginning, the bear market that has taken on the S&P 500 is just 260 points from being completely erased
Tesla on interest rates: Tesla has started offering consumers 84-month auto loans after Elon Musk said the carmaker would “have to do something” about rising interest rates
Central banks eyes another rate hike: Both Fed Chair Jerome Powell and ECB President Christine Lagarde have warned that inflation remains too high, forcing them to raise borrowing costs further. But with neither central bank meeting again until September, economists say the outlook for policy into the back end of the year remains open-ended
Market Movement (YTD)
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