Bank Stocks Puke As Yellen Reportedly Warns Of 'More Mergers' Ahead

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by Tyler Durden
Friday, May 19, 2023 - 03:23 PM

Amid a major short-squeeze which has lifted the regional bank stocks almost 10% this week - the best week since Nov 2020 - CNN is reporting that during Thursday’s meeting with the CEOs of large banks, Treasury Secretary Janet Yellen told executives that more bank mergers may be necessary as the industry continues to navigate through a crisis, two people familiar with the matter told CNN.

Yellen echoed remarks from US regulators who have said there may be bank mergers in the current environment, one person familiar with the matter said.

Additionally, this is nothing new as during an interview with Reuters this week, Yellen said a certain degree of consolidation in the regional and mid-size banking sector could occur.

“This might be an environment in which we’re going to see more mergers, and you know, that’s something I think the regulators will be open to, if it occurs,” Yellen told Reuters.

Roughly translated that means expect more imminent bank failures.

“Consolidation is inevitable,” said Ed Mills, Washington policy analyst at Raymond James.

“The progressive backlash is the Catch-22.”

Overall, regional banks took an immediate hit...

With some of the more headline-worthy names really hammered...

Interestingly,the readout provided by the Treasury Department following that meeting noted that Yellen addressed the banking stress, reaffirming the “strength and soundness of the US banking system” and thanking the bankers for “their leadership and support.” But that readout did not mention discussion of bank mergers.

However, sources tell CNN that bank mergers were discussed during Yellen’s meeting with bank CEOs.

And this came at the very second when Fed Chair Powell was reassuring the public that the US banking system was "strong and resilient".