The banking crisis that slammed U.S. regional banks has left Wall Street largely unaffected, and the fallout may ultimately benefit the biggest players.
The perception that the largest banks are too big to fail is making them more attractive to customers looking for safety after the sudden collapse of Silicon Valley Bank SIVB and Signature Bank SBNY rattled markets.
Michael Arone, chief investment strategist for US SPDR Business at State Street Global Advisors, told Yahoo Finance Live that there's a perceived safety around moving assets. There is this perceived safety of moving up in terms of larger banks and deposits with larger banks, but I do think it's worth it. While regional banks such as First Republic FRC and PacWest Bancorp PACW battle declining deposits, their larger counterparts such as JPM Citigroup C Wells Fargo WFC and Bank of America BAC have seen deposits surge.
Bank stocks have taken a hit across the board, but large national bank stocks have remained relatively resilient compared to regional bank stocks, which continue to suffer the brunt of the selling.
Over the last month, JPMorgan stock fell 6.6%, Citigroup dropped 10.9%, and Wells Fargo declined by 17.5% as investors remained jittery over liquidity concerns.
The First Republic Bank stock plunged 86.7% at the same time, while regional banks Zions Bancorp ZION PacWest and Western Alliance WAL suffered declines of 35.7%, 59.9% and 51.3%, respectively, due to contagion fears.
The favorability of large banks is similar to the financial crisis of 2008 and 2009, with 11 of the nation's largest banks swooping in to stabilize First Republic with a $30 billion cash infusion. In 2008, it was JPMorgan Chase's purchase of Bear Stearns and Washington Mutual that helped the investment bank become the powerhouse it is today.
Experts say that the recent crises will likely change the banking landscape.
The current shake-up has created a lot of doubts about small and regional banks, and it would be a tragedy if those banks went away, said Kevin Greene, CEO of Tassat in an interview with Yahoo Finance Live.
Greene warned that the US could move towards a model of banking similar to the European system, which has fewer institutions, and that model has been proven not to be good in terms of productivity, economic growth, and innovation. Greene stressed that the strength of the U.S. economy is the strength of the U.S. economy and should be preserved because of the number of small and medium-sized banks that are operating across the U.S. near small businesses and borrowers.
Greene said that we're at a crossroads in the banking industry, and that we're at a crossroads. Before Silicon Valley Bank went down, the growing influence of big banks was already underway.
Stephen Biggar, director of financial services at Argus Research said the number of FDIC-insured commercial banks in the U.S. has gone from 10,000 banks to 4,700 in the early 1990s.
Biggar told Yahoo Finance that bank consolidation was a theme. The small will get smaller and the large will get larger. The larger they get, you would hope that they would get safer.