The banking sector keeps taking the hits, as shares of large bank stocks saw big drops early Wednesday, mere days after two of the largest bank failures in U.S. history.
Wednesday morning’s rout was largely led by Credit Suisse, a Swiss bank that saw its shares fall more than 30% after news that its largest investor, Saudi National Bank, indicated that it would not be providing more cash to help steady the firm, according to reporting from Reuters.
Those indications followed Credit Suisse’s Tuesday announcement (via its annual report) that it had found “material weaknesses” in the company’s financial reporting processes for the previous two years, 2021 and 2022.
“Group’s internal control over financial reporting was not effective, and for the same reasons, management has reassessed and has reached the same conclusion regarding December 31, 2021, as more fully described in this Annual Report,” the report reads. “Management has also accordingly concluded that our disclosure controls and procedures were not effective.”
The revelation from Credit Suisse’s annual report, along with the signal from its largest investor that additional cash investment was not incoming, further rocked the already-jittery banking sector, sending stock prices down. The sector had been reeling from the failure of Silicon Valley Bank last week, and the subsequent failure of Signature Bank over the weekend.
The failure of those two banks caused stocks of relatively small regional banks—such as First Republic Bank, Western Alliance Bancorporation, and PacWest Bancorp—to lose significant value at the beginning of the week. But fears of a market contagion have evidently spread to larger banks, too, with the news related to Credit Suisse compounding the situation.
Meanwhile, BlackRock’s Larry Fink released his widely read “Annual Chairman’s Letter” on Wednesday, raising the possibility that the crisis could get worse before it gets better. “The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks,” Fink wrote of SVB. “But markets remain on edge. Will asset-liability mismatches be the second domino to fall?”
As of approximately 10 a.m. ET on Wednesday, shares of Wells Fargo were down 4.5% since the start of the trading day, while Citigroup shares were down 5.3%, Bank of America shares were down 2.5%, and JPMorgan Chase shares were down 3.6%.
Perhaps expectedly, shares of alternative assets have seen a boost in recent days. Bitcoin, for instance, is up more than 23% over the past five days to nearly $25,000—a valuation it hasn’t seen since June 2022. Ethereum, similarly, is up more than 17% over the past five days as well. Gold, too, is up more than 6%.
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