Moody’s Investors Service has initiated a review for possible downgrade of First Republic Bank and five other US lenders, indicating growing apprehension about the stability of regional financial institutions after the collapse of Silicon Valley Bank.
– K.C. Conway, Commercial Real Estate Economist and Futurist
The other lenders placed on review are Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp., and Comerica Inc. Moody’s decision was influenced by worries about the lenders’ dependence on uninsured deposit funding and the potential for unrealized losses in their asset portfolios.
FTX and Silver Gate in TX, followed by SVB bank, have been deemed a total failure by both the Fed and bank regulators. They failed at their primary job by failing to anticipate the unintended consequences of the steepest and quickest interest rate increase in history. Additionally, there is a concentration risk failure by allowing the tech industry to become concentrated in a single bank, which is surprising considering the lessons learned after the 2009 financial crisis. It is puzzling why the Fed would allow this to happen in the tech industry but not in larger corporations such as P&G, GM, Ford, Tesla, etc..
In light of the unintended consequences of rapid and successive interest rate hikes, it is unclear if inflation can remain the Fed’s central focus. There are no clear answers to these questions, and with the Fed’s FOMC meeting scheduled for next week, there is a greater than 50% chance of scaring the market even further.
Only time will tell how this situation unfolds, and businesses will need to scramble to find ways to secure capital and determine where to invest their cash. With this backdrop, it is unlikely that any kind of CRE lending activity will occur.
But, we want to take this opportunity to inform you that you can continue to have confidence in Achieve Investment Group. Our firm has ZERO exposure to Silicon Valley Bank, Signature Bank, First Republic Bank, and additionally stressed banks. Our risk management team has taken the necessary steps to ensure that your investments are protected, and we are continuously monitoring the market to adjust our strategies as needed.
Our team of experienced professionals is constantly monitoring the market and making informed investment decisions on behalf of our clients. We believe that our disciplined approach and focus on long-term value creation will continue to serve our clients well, even in uncertain market conditions.
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