Bank stocks climb as crisis fears evaporate

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Markets are betting the worst of the banking crisis has passed as regulators rush in.

Investor optimism that the worst of the banking crisis has passed is helping to reverse a sharp sell-off in global bank stocks, with US regional lenders leading a broad market rally.

A similar story played out on the ASX. Commonwealth Bank shares touched $98 on Wednesday from earlier lows of $95. NAB gained 1.2 per cent to $28.Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, said concerns over the banking sector’s stability had eased due to “quick initiatives and reassurances” from the European Central Bank and Bank of England.

“The global financial crisis was a credit crisis – the problem was poor-quality housing-related assets on bank balance sheets. However, we may be at a time in the cycle where it morphs from an interest rate story to a credit story. If so, the outlook for credit and equity markets becomes more difficult.”

Morningstar senior market strategist David Sekera agrees the series of bank collapses is “not the beginning of a wider systemic issue” in the US, distinctly different from the GFC.For the banking sector, he anticipates the fallout to lead to increased funding costs as banks raise interest rates to retain deposits and compete for new ones. On the economic front, a reduction in small and regional bank lending could result in slower economic growth.

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