Silicon Valley Bank and Signature were joined by First Republic at the weekend as the list of US bank rescues continues to grow.
JP Morgan stepped in and bought First Republic, albeit with a hefty slug of public money, prompting Jamie Dimon, the Wall Street giant's garrulous boss, confidently to state that the US banking crisis is "over".
Maybe, but share prices of the regional banks have continued to fall since First Republic’s rescue with at least two or possibly more seemingly at risk judging by the scale of the selling.
Shares in PacWest Bancorp and Western Alliance Bancorporation shed 28% and 21% respectively yesterday, with other regionals Zions Bancorporation down 13%, Comerica 12.3% and KeyCorp 10%.
Those movements hardly suggest a crisis over, while those at the gloomy end of the spectrum suggest it hasn’t even started yet.
At the root cause of all the jitters is the exposure of regional banks to commercial property, with a report by the Hoover Institute, cited by The Telegraph, suggesting 2,315 or half of US banks currently have assets worth less than their liabilities.
In total, that adds up to a deficit of around US$2trn, according to the report and, as with First Republic, a lot of that is tied in unwanted or empty commercial real estate assets that are rapidly diminishing in value.
Following the steep rise in interest rates, as the US Federal Reserve tries to curb inflation, banks now face a commercial real estate (CRE) loan book burden that is growing while costs rise and liquidity shrinks.
According to Capital Economics, US commercial property prices are set for a 22% peak-to-trough fall, but worryingly only around 5% has yet occurred.
As regional banks account for 70% of all property financing, it points to a lot more potential trouble ahead, especially if interest rates rise further.
The Fed makes that call tonight, with current predictions of another 0.25% turn upwards taking the funds (base) rate to 5-5.25% before reductions and some relief later this year.
How many of the US regional banks will still be around by then remains to be seen.