Regional banks stage major equity rally after Monday’s defeat

First Republic Bank FRC 27.84%

and other regional lenders bounced back from their worst sell-off in three years on Tuesday, a sign that regulators’ emergency measures to contain a banking crisis are calming investors.

The strongest rebounds were seen in regional banks that suffered the worst declines in recent days. Shares of First Republic, which crashed Monday, rose more than 30% on Tuesday. PacWest Bancorp PACW 33.85%

was up 36% and Western Alliance was up 14%. All three stocks were up more in previous trading, but cut some of their gains.

Other regional banks posted more modest gains or fell in volatile afternoon trading, with Comerica CMA 3.59%

recently up 3% and Truist Financial about 4% up. Fifth Third was down 3% and US Bancorp climbed about 2%. The largest banks also rose, with Wells Fargo & Co. up about 3% and Citigroup up 5%.

The gain helped the broader KBW Nasdaq index of commercial banks rise 2%, while the SPDR S&P Regional Banking ETF KRE 2.16%

increased by 3%. Both posted their worst performance since 2020 on Monday.

The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corp. rolled out emergency aid for banks late Sunday, saying depositors would be made healthy after the failures of Silicon Valley Bank and Signature Bank. The move was designed to appease customers worried about the safety of their uninsured deposits following the collapse of Silicon Valley Bank last week.

Shares of First Republic, a bank that targets the wealthy, rallied on Tuesday after a sharp sell-off.


justin lane/Shutterstock

As of Monday, investors were still concerned that some banks could face runs like Silicon Valley Bank’s. First Republic, a bank that targets the wealthy with large account balances, closed nearly 62% after previously dropping as much as 75%, its biggest drop ever. The KBW index fell by about 12%, the biggest drop since March 2020.

Bank stocks that sold off last week and Monday should fully recover, said Shana Sissel, the CEO of Banrion Capital Management, but it may take time.

“Bank stocks still have stress in their system,” she said.

The abrupt collapse of Silicon Valley Bank, the second largest bank failure in US history, prompted regulators to impose emergency measures to stem the fallout. WSJ’s Rachel Ensign explains how the crisis unfolded and what could happen next. Photo: Preston Gannaway for The Wall Street Journal

On Tuesday, rating agency Moody’s Investors Service revised its outlook for the US banking system from stable to negative. A day earlier, Moody’s said it would review First Republic and five other banks for potential downgrades.

“This isn’t over yet,” said Eric Compton, banking analyst at Morningstar.

“No one knows for sure how it will turn out, but there are realistic scenarios where most of these banks will eventually make it.”

Write to Gina Heeb at

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