Paused But Not Forgotten

It’s been a wild week for bank stocks, so let’s take stock of where they all stand after today. Though before we get into some charts, let’s recap today’s news stories related to the sector.

First up, SVB Financial Group, the parent company of Silicon Valley Bank, has filed for Chapter 11 bankruptcy protection. The company says this process will allow it to evaluate strategic alternatives for its unaffected businesses and assets, including SVB Capital and SVB Securities, which remain operational. Also, note that Silicon Valley Bank was not included because it was taken over by the Federal Deposit Insurance Corporation (FDIC) last week. ⚖️

SVB Financial Group has roughly $3.3 billion in unsecured debt and $3.7 billion in stock that will likely be eliminated during the bankruptcy process.

Meanwhile, President Biden is calling on Congress to strengthen accountability for executives involved in the bank failures. Some ideas floated to discourage excessive risk-taking include clawing back executive pay, imposing fines, and preventing them from retaking jobs in the banking industry. 📝

And the soundbite that’s going most viral today is one in which Treasury Secretary Janet Yellen confirmed that only banks that pose a systemic risk would receive similar treatment as Silicon Valley Bank. Senator James Lankford used his line of questioning to point out that there are two classes of banks, those that the government will step in to help and those that it will not. 😮

While this was obvious to many market participants already, hearing Yellen say it so candidly sent most of FinTwit and the media into a frenzy. It also sent smaller community and regional bank shares lower as fears that deposits will continue to flee to larger “too big to fail” banks continue to spread. 😬

This is truly incredible.

Here is an exchange with Senator James Lankford & Yellen.

He asks, "Will every community bank … get the same treatment as SVB?"

Yellen: "Banks only get the treatment if … the failure to protected uninsured depositors would create systemic risk." pic.twitter.com/JvAX3Hhb6F

— unusual_whales (@unusual_whales) March 17, 2023

And internationally, Credit Suisse shares tumbled another 7% on news that it’s borrowing up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank. Executives have a long weekend ahead as they discuss scenarios for the bank as it struggles to survive. 🏦

Since regional banks are the big focus these days, below we’re looking at its holdings. In it, we’re plotting their total deposits and how far the stock is below its 52-week highs. This can help provide some context as to the relative size of each of these banks, as well as how much they’ve fallen in price recently. 🤔

And below is the 10-day performance of various bank sector ETFs. They range from the major banks down to regional and community banks. We’ve even included insurance, capital markets, and other industry ETFs because they’ve all been hit hard. 

Needless to say, it’s been a rough two weeks, and the volatility doesn’t seem to be slowing down. As always, we’ll keep on top of it and update you as the situation develops. 🤪

Chinese electric vehicle maker XPeng Motors is rising today despite weak fourth-quarter earnings.

Its adjusted earnings per share of $0.37 were two cents shy of expectations. And revenues of $750 million were down 40% YoY and $24.4 million short of the consensus view. 🔻

Quarterly vehicle deliveries fell roughly 50% YoY to 22,204, with its vehicle margin falling 590 basis points. China’s electric vehicle pricing war has eaten into its margins, and China’s shutdown impacted production for most of last year. Like other players, the company is refocusing its bets and improving operational efficiency to reduce costs. 🏭

Regarding growth drivers, management noted that smart technologies would play a big role in the industry and that the company intends to lead in the space. They believe the company is well-positioned and can use this advantage to grow market share. Analysts note that’s a longer-term advantage and will unlikely produce short-term results. 🤖

Looking ahead, the company expects to deliver 18,000 to 19,000 vehicles in Q1, with total revenues of $580.4 to $609.4 million. 🚗

Despite the lackluster results and weak guidance, the market responded positively. $XPEV shares rose 6% on the day. 🤷

The recent carnage in the energy sector has been lost in the shuffle, so let’s take a quick look.

Below is a chart of crude oil’s weekly chart dating back three years. With this week’s decline, prices fell to their lowest level since December 2021. And the one-week rate of change shows this is the largest one-week decline since early 2020. 😬

We mention it because the oil price decline is also showing up in energy-related ETFs. Their 10-day performance shows declines ranging from 6% to 22%. 🔻

With the energy sector shifting from last year’s best performer to this year’s worst, many investors are trying to determine whether the downward trend will continue or if this is a potential buying opportunity. For now, we’ll have to wait and see. 👀