Bank Deathwatch Megathread

[jaichind]

https://www.cnbc.com/2023/03/24/citi-china-is-relative-safe-haven.html

"China is a ‘relative safe haven’ in the face of global banking stress, Citi economists say"



At least in the Chinese language media, there are a bunch of stories of people from Greater China (PRC and ROC) as well as Overseas Chinese pulling their money out of Western banks and shifting them to HK and Singapore.  The ones in HK that are the new darling of the Overseas Chinese are actually PRC government-owned banks with branches in HK with news that there is queues/delay to open an account there due to the high demand.  I will not be surprised if the current turmoil leads to a second wind for the HK banking sector which had been in the doldrums since the 2019 HK protests.

[jaichind]

https://www.wsj.com/articles/where-financial-risk-lies-in-12-charts-792bca35

"Where Financial Risk Lies, in 12 Charts"



The market value of securities at banks as a percentage of cost is now around 90%, much worse than in 2008.  This might seem bad but if you hold on to these securities you will make a solid return next few years given that current interest rates are at least above inflation by 1% which is a situation that did not exist in 2008.

So the "crisis" will shift from the banking sector to the USA fiscal situation in the medium term given the bulge of interest payments the USA federal budget will have to pay.  The net USA federal debt as a % of GDP is about 100% and will rise to around 110% in the next few years.  The last time the USA had to pay above inflation rates of interest for a significant period was in the 1990s when net federal debt as a % of GDP was in the low 30%.  These interest payments mean that these banks will get a bonanza if they survive.  But for now, they have to survive first.

[jaichind]

https://www.bloomberg.com/news/articles/2023-03-29/barclays-strategist-joe-abate-sees-a-second-wave-of-deposit-outflows-coming-fo

"Barclays Strategist Joe Abate Sees A ‘Second Wave’ of Deposit Outflows Coming for Banks"

This predicted wave is based on the fact the fact that we are no longer in financial repression various money market funds will now pay better than bank deposits.  This will come at the worst time and will hit firms like Schwab that rely on sweep funds to make money.