Regional bank stocks are moving deeply into the red on Tuesday, the day after JPMorgan Chase & Co. JPM said it’s acquiring First Republic Bank FRC as a way to shore up confidence in the U.S. banking system. Meanwhile, Morgan Stanley MS is reportedly planning to lay off 3,000 workers. PacWest Bancorp PACW is down 29%, Western Alliance Bancorp WAL is falling 24.6% and Metropolitan Bank Holding Corp. MCB is down by 23.8%. The KBW Nadaq Bank Index BKX is off by 3.7%, the Financial Select Sector SPDR Fund XLF is lower by 2.2% and the SPDR S&P Regional Banking ETF KRE is lower by 5.2%. JPMorgan fell 1% and Goldman Sachs Group Inc. GS dropped 2.6%, while the Dow Jones Industrial Average DJIA dropped 1.2% and the S&P 500 SPX moved lower by 1.2%. CFRA analyst Alexander Yokum said one key takeaway from the acquisition of First Republic Bank by JPMorgan is that recent regional bank failures will have a negative impact on future earnings for the banking industry. “All the costs of bank failures will be borne by banks and not taxpayers, although we expect banks to indirectly pass along many of these costs to customers through higher fees and higher interest rates on loans,” Yokum said. CFRA estimates the replenishing the government’s Deposit Insurance Fund could impact banking industry earnings by 14% over one year, and 7% impact over two years, or nearly 5% over three years.
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