These Banking Stocks are on the Brink of Collapse

Banks Facing Challenges Amid Moody’s Downgrades

Moody’s recent downgrading of several regional US banks has raised concerns among investors about the resilience of the banking sector in both the US and Europe.
US banks, already struggling with persistently high interest rates and increasing funding costs, must now also cope with the uncertainty stemming from the prospect of a possible recession.

The Impact on Commercial Real Estate

Regulatory authorities and investors are closely monitoring the commercial real estate holdings of credit institutions as property values decline across the US, especially for office buildings and apartments.
According to Bloomberg, nearly one-third of California’s 127 registered banks have real estate debt exceeding 300%, the highest among US states.

Moody’s warning currently targets banks most vulnerable to commercial real estate debt, particularly smaller institutions.
These banks are hit by both plummeting office prices (-35% since 2022) and the unexpected rise in interest rates by the Fed.
This situation has already led to the failure of institutions like Silicon Valley Bank, Signature Bank, and First Republic Bank.

Challenges for Major Financial Institutions

However, even major financial institutions like JP Morgan, Bank of America, Citi, and Morgan Stanley may not be exempt from these challenges.
Each faces factors threatening their stability and profitability, with investors now fearing an unprecedented crisis in the banking sector.

JP Morgan: Despite a 6% profit increase to $13.4 billion in the quarter, JP Morgan’s CEO Jamie Dimon expressed caution about the US economy’s future.
Concerns include geopolitical tensions, persistent inflation, and the Fed’s quantitative tightening policies, posing obstacles to the bank’s profitability and stability.

While revenues rose by 8% due to higher interest rates and larger loan balances, JP Morgan faced a decline in total trading revenues.
This decline, together with the impact on smaller banks, signals potential future profitability vulnerabilities for JP Morgan.

Furthermore, growing concerns about losses from commercial loans, especially on office and multifamily buildings, and increasing credit card defaults add further challenges to the banking sector.

Continue reading about the situation at JP Morgan and other major banks.