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The stocks of KeyCorp, Comerica Inc. and Zions Bancorp fell Thursday after all three reported a drop in deposits and weaker-than-expected quarterly results, as regional banks sustained collateral damage from the collapse of Silicon Valley Bank.
Truist Financial Corp.
TFC,
also weighed in with results that fell short of estimates, while Fifth Third Bancorp
FITB,
fell slightly shy of earnings and revenue projections.
Meanwhile, First Republic Bank
FRC,
fell 1.3% after big gains in the previous session, ahead of its first-quarter results on Monday.
From March: First Republic stock is getting battered. Here’s how the bank’s tailspin started and why it hasn’t stopped.
The KBW Nasdaq Bank Index
BKX,
moved down by 1.9%.
Some regional bank stocks that rose earlier in the day fell back into the red.
Phoenix, Ariz.-based Western Alliance Bancorp
WAL,
dropped by 2% and Metropolitan Bank Holding Corp.
MCB,
fell 2%. The former sparked a rally in the sector on Wednesday after earnings showed deposits recovering. The bank said it added $2 billion in deposits from March 31 to April 14.
Chris Maranic, bank analyst at Janney, said deposit flows and deposit costs came into focus for regional banks this earnings season.
Banks that have reported so far have seen deposits drop by about 2% in the quarter, less than the 3% to 3.5% rate suggested by recent Fed data. “Stocks were excessively punished,” Marinac said.
The first-quarter reports from banks are showing that stock prices dropped excessively in recent weeks, because deposits held up better than expected, he said.
However, the cost of deposits continues to rise as banks play catch up on interest rate payments with higher interest rates by the central bank.
To win more positive sentiment from investors, it may be necessary for deposit stability to continue for another quarter or two, Marinac said.
Banks may also have to raise capital as a way to address concerns around unrealized securities losses in their portfolios.
Or if their deposits climb or remain stable, that would also calm fears that banks would have to see assets at a loss to cover withdrawals, which is what happened with Silicon Valley Bank.
Another key indicator of a turnaround in regional bank stocks will be when interest rates peak. However it’s not yet clear when this will take place because at least one or possibly two more Fed rate hikes are expected in 2023.
Janney has a buy rating on Fifth Third Bancorp, and holds on Truist Financial and Regions Financial . The firm recently downgraded Hancock Whitney Corp.
HWC,
to neutral from buy.
Dallas, Texas-based Comerica
CMA,
slid 2.7% Thursday after the bank said its first-quarter net income rose to $324 million, or $2.39 a share, from $189 million, or $1.37 a share, in the year-earlier quarter.
The numbers were down from the fourth quarter, however, when the bank earned $350 million, or $2.58 a share.
Comerica did not provide a revenue number but said it was down 2.9% from the fourth quarter. The bank posted revenue of $1.02 billion in the fourth quarter, and was expected to post revenue of $990 million for the first quarter.
Since March 9, the bank’s deposits fell by $3.7 billion, the bank said in a statement. That was the day that the stock of Silicon Valley Bank fell more than 60% after disclosures led to a run on that bank, which was shuttered by the California regulator a day later.
That bank’s demise led to massive deposit flight out of regional banks and into bigger ones.
Comerica said uninsured deposits decreased by $10.5 billion to $35 billion, or 54% of total deposits in the quarter. The bank added $13.8 billion in liquidity in the quarter to provide a buffer.
Net interest income rose to $708 million in the quarter from $456 million a year ago. It set aside $30 million as a provision for loan losses, after reducing provisions by $11 million a year ago.
The stock has fallen 30% in the year to date, while the S&P 500 has gained 8%.
KeyCorp falls short on credit loss allowance
KeyCorp
KEY,
stock dropped 3% after it missed its first-quarter earnings target because of a build up in credit loss allowance and a drop in deposits.
The Cleveland, Ohio-based lender said its first-quarter net income fell to $275 million, or 30 cents a share, from $420 million, or 45 cents a share, in the year-ago quarter. The company fell short of the analyst estimate of 44 cents a share.
The latest quarter included 14 cents a share to build up its allowance for credit losses “to reflect changes in our economic outlook.”
First-quarter revenue at KeyCorp rose slightly to $1.714 billion from $1.696 billion, but missed the analyst estimate of $1.79 billion.
Average deposits fell $6.8 billion to $143.4 billion.
“The successful de-risking of our loan portfolios over the last decade positions Key to outperform, from a credit perspective,” the company said.
Read now:Seized assets from Silicon Valley Bank and Signature Bank are fetching 85 to 90 cents on the dollar
Truist profit rises but misses forecast
Truist Financial
TFC,
the Charlotte, N.C.-based regional lender, said its first-quarter net income rose to $1.41 billion, or $1.05 a share, from $1.33 billion, or 99 cents a share, as total revenue rose to $6.15 billion from $5.35 billion.
Analysts polled by FactSet expected earnings of $1.14 a share on revenue of $6.09 billion.
Truist stock fell 3.5%.
Average deposits decreased 1.2% compared to the prior quarter primarily driven by the impacts of monetary tightening and higher-rate alternatives, the bank said. It took a $502 million provision for credit losses, compared to $467 million in the fourth quarter and a $95 million gain in the year-ago quarter.
Zions Bancorp stock falls after earnings fail to meet forecasts
After the closing bell on Wednesday, Zions Bancorp.
ZION,
said its first-quarter net income increased to $198 million, or $1.33 a share, from $195 million, or $1.27 a share, in the same quarter last year.
The bank missed the analyst estimate for earnings of $1.53 a share.
Deposits fell by 16%.
The bank reported net interest income of $679 million, a 25% jump from a year ago, but less than the $688 million projected by analysts.
Net interest margin, or the difference between what banks take in from interest on loans and what they have to pay to depositors, came in at 3.33%, compared with 2.6% in the prior-year quarter.
Zions stock dropped 4.9% on Thursday.
D.A. Davidson reiterated a buy rating for Zions Bancorp and cut its price target to $41 a share from $47.
“Zion reported a weak quarter with a much weaker than expected outlook on net interest income reflecting an acceleration in deposit costs and funding costs due to elevated deposit outflows,” D.A. Davidson analysts said. “Assuming the U.S. goes into a recession, the focus will turn to credit and Zion is a flight quality to name with a long track record of best in class credit metrics.”
See now:Why bank failures aren’t always a bad sign for the stock market, according to Invesco
Fifth Third Bancorp stock drops on results
Cincinnati, Ohio-based Fifth Third Bancorp
FITB,
moved down by 0.7% after its first-quarter earnings of 78 cents a share missed analyst projections by a penny a share, according to FactSet data.
Revenue of $2.218 billion fell slightly short of the estimate of $2.228 billion.
Average and period-end total deposits remained flat with the fourth quarter, the company said.
“We have continued to navigate the uncertain economic environment well, including delivering solid deposit outcomes throughout the first quarter,” the company said.
Fifth Third said it added new households in its consumer unit and “new quality relationships” in its commercial business, as well as its acquisition of Big Data Healthcare to speed up its peer-lending digital payments and managed services products.
See now: How does the banking crisis affect you? Here’s what to ask your financial adviser.
Bill Peters and Steve Goldstein contributed to this article.
