U.S. bank stocks have been attempting a comeback so-far this year after a more than 20% fall in 2022, fueled by hopes that the Federal Reserve will succeed in taming inflation without causing an economic catastrophe.
These worries stem from jitters about the economy, potential loan losses, as well as weaker loan demand due to increased borrowing costs since the Fed has been aggressively hiking interest rates since March 2022. And while its rate hikes have still not reduced inflation as much as investors had hoped, the Fed is still trying to negotiate a soft landing, said Rick Meckler, a partner at Cherry Lane Investments, a family investment office.
And on the corporate front, Morgan Stanley finance chief Sharon Yeshaya said at the time that confidence was improving among client CEOs who had revived talks about potential deals with a fog of uncertainty “beginning to lift.” Competing with the highest short-term Treasury rates in decade and a half, banks are having to raise savings account rates to keep deposits.