Medium-sized banks, in the target a year after the collapse of Silicon Valley Bank

Medium-sized banks are once again in the market's focus a year after the collapse of Silicon Valley Bank. This week, the financial sectors of the United States, Germany and Japan have been shaken by the doubts generated by the exposure of some smaller entities to doubtful loans linked to the real estate sector and that has made the crisis unleashed in February of the year fly over. past and that caused several banks to fail.

The epicenter of the earthquake is again located in North America. The American entity New York Community Bancorp triggered the alerts after the Moody's agency lowered its rating to junk bond. The bank reflected in its annual results a deterioration of 2.2 billion and losses in the fourth quarter of the year caused, in part, by the deterioration of its mortgage portfolio, which is under pressure of defaults due to the high interest rate environment. After the rating downgrade, the shares plummeted 23% in the last week.

And although it is a minor entity, the authorities and the market are attentive to any warning signs. US regional banks have significant exposure to the residential real estate sector and supervisors fear that a small flutter could cause a systemic earthquake.

A year ago, the medium-sized American bank was already under the microscope due to the turbulence of Silicon Valley Bank, which was forced into bankruptcy due to a high-risk business model that caused a massive withdrawal of customer deposits and a high exposure to public debt. That crisis also took down Signature Bank and First Republic Bank.

Market doubts have also affected Europe. The German bank Deutsche Pfandbriefbank, specialized in financing the real estate sector, is trading at historic lows (4.5 euros per share). With the continuous increases in interest rates, its exposure to mortgages has increased the entity's risk levels, which have translated into higher provisions: if in the first nine months of the year the provisions amounted to 100 million, only in the fourth quarter of the year has had to double the figure to 210 million. In one week, its shares fell 18% on the stock market.

The German firm has tried to reassure investors and analysts, but recognizes that it is in a context of “persistent weakness in the real estate markets.” The uncertainty about this entity has infected the two large German banks, Deutsche Bank, which lost 7.77% in the week, and Commerzbank, to a lesser extent, which lost 3%.

According to Bloomberg, the European Central Bank (ECB) has been quick to act and threatened banks with higher capital requirements if they do not adequately control risks related to the real estate sector. Although a hypothetical tightening would begin to be applied next year, the regulator wants to limit losses on this type of assets. The ECB has been examining banks' lending practices in recent years and has accused them of taking too much risk and overvaluing loan collateral. The same agency points out that the pressure from the regulator has already caused banks, in general, to have provided greater provisions to face possible losses due to non-payments on mortgages.

Market uncertainty over mid-sized banks has also touched Asia. The Japanese Aozora Bank also plummeted 18.5% last week after the entity announced loss forecasts for its fiscal year, due to its exposure to the US real estate sector with damaged mortgage portfolios and whose collections will not be recover.

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