The US regional banking sector currently finds itself under significant strain, with smaller players facing several significant headwinds:
- Deposit beta is climbing as banks are forced to raise rates to compete with money market funds.
- Overall funding costs are rising.
- Net interest margins look to have peaked.
- Provisions for bad loans are growing, with some companies reporting sequential double-digit increases.
- Hyper competition has been introduced from disruptive technology firms offering attractive rates on cash.
- Sector regulation and oversight appears set to tighten.
All told, the profitability path looks set to trend down sharply.
Silicon Valley Bank, Signature Bank and First Republic Bank have been consigned to the history books, along with approximately $550 billion worth of assets. The lens of the market has now moved quickly to focus on PacWest Bancorp.
TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, the strategy is to build local businesses of scale around TEAM’s core skill of providing investment management services.
