Bank stress may weigh on construction industry: Wells Fargo (NYSE … – Seeking Alpha

The failure this month of Silicon Valley Bank and Signature Bank, and the steps by bigger banks to rescue First Republic Bank (NYSE:FRC) have led to fears about the financial strength of other similarly sized lenders. Such stress on the banking system may negatively affect industries that depend on regional sources of funding, Wells Fargo strategists said Monday in a report.

“When concerned about capital growth, risky endeavors (capital expenditures, M&A, repurchases) are re-evaluated,” Christopher P. Harvey, analyst at Wells Fargo, said in a March 20 report. “Regional banks are big commercial real estate lenders, so tighter capital could weigh on the labor-intense construction sector.”

A decision this week by the Federal Reserve to pause rate hikes would be positive for risk markets in the near term, according to Wells Fargo.

“On stabilization and a pop in equities, we would advise repositioning the portfolio into less-cyclical, longer-duration positions,” the report said. “The anticipated capital issues and the behavior impact from the banking stress will likely spill over to the economy.”

More on the Bank Crisis:

Saudi National Bank hit with over $1B loss on Credit Suisse stake – report March 20

SVB’s bid window extended amid “substantial interest’ from potential buyers March 20

JPMorgan’s Jamie Dimon leads effort to steady First Republic Bank March 20

First Republic Bank stock sinks to all-time low as S&P downgrades again March 20

SVB Financial cut off from records due to FDIC takeover of bank March 20

New York Community Bancorp unit agrees to buy Signature Bank deposits, some loans March 19

Fed, ECB and four other central banks take ‘coordinated action’ to ensure dollar liquidity March 19

Source: seekingalpha.com