Trade Alert: More Bets Against Regional Banks
Three of the ones most likely to go bust according to our analysis.
Another View Of Our Analysis
In our post last week,
The Regional Banks Most Likely To Go Bust
Los Angeles’s Far East Bank gets a large, unscheduled withdrawal (Heat, 1995). Finding The Banks Most Likely To Go Bust In a post earlier this month, I mentioned a conversation I had with a bank expert about finding the banks most likely to go bust.
We shared the spreadsheet of the analysis we commissioned on the regional banks most likely to go bust. In that post, we mentioned two signals suggesting banks had exhausted their BTFP lifelines:
As you might imagine, the Federal Reserve isn’t going to advertise which banks have tapped out their lifelines, but as the banking expert explained, there are a couple of hints to look for in the data:
A big increase in “other borrowed money” in Q1. This will likely include loans from the BTFP, or,
An increase in pledged loans or pledged securities in Q1. This will likely be assets that were pledged to the BTFP as collateral for the bank’s loans from the BTFP.
If you sort our spreadsheet to select for “yes” to both of those hints, you get eight regional banks. Two of them have already gone bust, one appears to be a false positive (it looks like its first quarter borrowing was to buy Silicon Valley Bank’s assets from the FDIC), and two we already have bets against. That leaves three more regional banks, each of which I placed trades against today.
Details below.
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