After Days of Panic, Midsize Banks See Stocks Rise

After nearly a week of tumult, the specter of a billowing crisis over the banking industry appeared to ease, at least for the moment, as pressure lifted on the midsize and regional lenders most in peril.

Shares of First Republic, which over the weekend had to slap together a multibillion-dollar rescue package to shore up its finances, soared nearly 60 percent on Tuesday before giving back most of those gains and trading around 20 percent up in the late afternoon. Shares are still down by roughly two-thirds over the past five trading days.

Western Alliance, previously a little-known Arizona bank, saw its stock shoot up 50 percent on Tuesday after Citadel, the investment giant run by the billionaire Ken Griffin, disclosed that it had taken a stake in the hard-hit lender, though that gain was pared back to around 10 percent by the afternoon.

Some of the worst-hit banks seemed to go to extreme lengths to put on a brave face, and had some success doing so. Zions Bank of Salt Lake City convened an emergency forum featuring both U.S. senators from Utah. Its stock bounced back to a degree Tuesday, as did shares of PacWest Bancorp of Los Angeles and Charles Schwab, the Texas financial conglomerate.

While stock prices aren’t a clear proxy for whether a bank is healthy or not, falling shares or even simply volatility in prices can set off panic in borrowers and lead to a bank run. The recent downturn in the industry, in fact, was set off in part by just that, when shares in Silicon Valley Bank, a technology-focused lender, plummeted after it disclosed plans to raise money that it needed to pay out some depositors.

Less than two days later, Silicon Valley Bank, which had roughly $175 billion in deposits, was taken over by federal regulators, making it the biggest bank failure since the 2008 financial crisis. Shares in other relatively small institutions have since fallen precipitously on fears that they, too, could be insolvent, though thus far only one other bank, Signature Bank, has been seized by regulators.

On Sunday, federal officials committed to paying out depositors at those fallen banks in full, even if the banks did not have sufficient money. Depositors reported Monday that they were able to take out funds, an enormous relief to employers and individuals who had been worried about when and if they would regain access to their money.

Officials stressed, however, that stock and bond holders in the banks themselves would still be in line to lose money on their investments.

Investors seem to be assuming that the federal backstop applied to Silicon Valley Bank and Signature would also apply to other institutions, said Greg Hertrich, a U.S. bank strategist at Nomura and a bank executive for more than three decades.

“Having been through a bunch of these, I can say: This one’s moving fast,” Mr. Hertrich said. “There are people who seem to believe that every deposit account is guaranteed without limit. I have not seen any indication that is what regulators have expressed.”

Much uncertainty remains. As bank shares were recovering Tuesday, only a few institutions had provided extensive updates about the degree to which skittish customers were pulling out their money.

On Monday, First Republic’s executive chairman, Jim Herbert, told CNBC in an off-camera interview that the bank was not experiencing an unusual level of withdrawals, a pronouncement that the anchors on the set greeted with visible skepticism. The bank did not respond to inquiries from The New York Times about the statement.

Charles Schwab’s chief executive, Walter Bettinger, boasted in a CNBC interview on Tuesday that his firm had seen positive incoming deposits this month overall, but neither he nor a Schwab spokeswoman would provide figures for this week, when Schwab’s stock has been under the most acute pressure. Mr. Bettinger said he had bought roughly $3 million in new shares in the company Tuesday to show his confidence.

Zions has been similarly vague. On Monday, the company held a forum with high-profile political guests, including not just both senators but the governor as well. Scott Anderson, the bank’s chief executive, opened by reading a script that noted Zions had a more diversified business base than Silicon Valley Bank, but he did not take questions or provide new information about his organization’s financial base during the crisis.

Senator Mitt Romney of Utah, who was at the event, compared the situation to the film “Everything, Everywhere All at Once,” which won seven Academy Awards the night before. “This is a lot of stuff that happened at the same time,” Mr. Romney said.


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