In the wake of JPMorgan Chase’s acquisition of First Republic Bank, regional banks like Pacwest and Western Alliance have seen their stock prices hit new lows, with all four major U.S. benchmark stock indexes in decline. The banking industry appears to be teetering on the edge, demonstrated by Pacwest’s recent 35% stock price drop following the release of its 2023 first quarter earnings report, which showed a net loss of $1.21 billion.
This comes off the back of First Republic Bank’s collapse and three major bank failures in March. Despite President Joe Biden’s assurance that the industry is progressing toward “stabilization”, the public is wary of the precarious state of traditional banking. While taxpayers will not be responsible for bearing the cost of these failures, it’s likely that financial institutions will attempt to recoup losses by increasing fees and loan interest rates.
Wall Street investors remain uneasy as First Republic Bank’s collapse lingers in their minds. JPMorgan Chase CEO Jamie Dimon claimed that “this part of the crisis is over” after taking over the struggling bank, but doubts persist. Amidst this troubled period in the banking sector, cryptocurrencies and precious metals have found themselves going against the grain and experiencing growth: Bitcoin (BTC) and Ethereum (ETH) increased between 1.1% to 1.5% as investors sought alternative assets.
In addition to cryptocurrencies, precious metals like gold and silver have seen their value surge against the US dollar, with gains between 1.4% and 1.54%. As Pacwest shares rebound, currently down between 22% and 27% against the greenback, the question of the U.S. banking industry’s future remains open for discussion.
On one hand, the continued turmoil within the banking sector may push more investors to seek alternative investments like cryptocurrencies and precious metals. On the other hand, it may be possible for the U.S. banking industry to regain public trust through increased transparency and regulation.
However, as the industry faces mounting hardships, massive financial losses, and recent bank failures, it is clear that there is no straightforward path forward. Although the acquisition of First Republic Bank by JPMorgan Chase might signal the end of one crisis, it remains to be seen if the federal government’s reassurances of stabilization will be enough to quell the public’s unease and change the industry’s rocky trajectory.