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Yes, it's true – US bank stocks have clawed their way back to levels last seen before Silicon Valley Bank (SVB) collapsed. I've been staring at the charts almost daily since that chaotic weekend, and the recovery is nothing short of remarkable. But does this mean we're out of the woods? Let me walk you through what I saw on the charts and what it really means.
The SVB Collapse: A Quick Recap
SVB failed on March 10, 2023 (I still remember the Friday panic). Within days, Signature Bank was seized, and First Republic teetered. The KBW Bank Index (BKX) plunged roughly 25% in two weeks. Everyone feared a 2008-style contagion. But the Fed, Treasury, and FDIC stepped in with a backstop for deposits. That stemmed the bleeding, but bank stocks stayed beaten down for months.
How Bank Stocks Plummeted and Then Recovered
From the SVB event low, the BKX index bottomed around $73. At the time, I bought a small position in a regional bank ETF – I'll admit, it felt like catching a falling knife. The recovery was gradual, then accelerated in late 2023 as earnings stabilized and the yield curve inverted less steeply. By early this year, the BKX had reclaimed its pre-SVB level of around $98. That's a 34% gain from the trough.
But not all banks recovered equally. Let's break down the major names.
Major Bank Recovery Snapshot (Approximate from Trough to Pre-SVB High)
| Bank | Trough Price | Pre-SVB High | Time to Recover (months) |
|---|---|---|---|
| JPMorgan (JPM) | $119 | $142 | 4 |
| Bank of America (BAC) | $25 | $33 | 6 |
| Wells Fargo (WFC) | $35 | $43 | 5 |
| Citigroup (C) | $40 | $49 | 7 |
| Regional ETF (KRE) | $34 | $42 | 8 |
Data sourced from Yahoo Finance, rounded for clarity. Actual levels may vary slightly.
Notice how JPMorgan bounced back fastest – it's seen as a safe haven. Regional banks took longer, and some like First Republic never made it (it was acquired).
Chart Comparison: Then vs. Now
If you overlay the BKX chart from January to June of that year, you see a V-shaped recovery with a scar. The index broke above its pre-SVB high on a closing basis in November. What's interesting is the volume: during the plunge, panic selling was extreme; during the recovery, volume was lower, suggesting institutional accumulation rather than retail euphoria.
I personally use moving averages to gauge momentum. The 50-day moving average crossed above the 200-day (golden cross) about four months after the crisis – a classic bullish signal. As of today, both are sloping up, though the slope has flattened recently.
Key Drivers Behind the Rebound
How did we get here? Four things worked in banks' favor.
- Deposit inflows stabilize: After the initial flight to money market funds, deposits started returning to regional banks by summer. People realized the FDIC insurance limit increase (temporarily) made smaller banks safer.
- Net interest income held up: Despite higher deposit costs, banks benefited from higher loan yields. The net interest margin compressed but didn't collapse.
- Regulatory relief expectations: The Fed hinted it wouldn't impose Basel III endgame as aggressively as feared. That gave bank stocks a boost.
- Profitability surprises: Q3 and Q4 earnings mostly beat lowered expectations. JPMorgan, in particular, reported record profits.
What This Means for Investors
If you're looking to buy bank stocks now, you're not early. The low-hanging fruit is gone. But that doesn't mean the rally is over. Here's what I tell friends who ask.
Check valuations
The BKX price-to-book ratio is still around 1.1x, below the 10-year average of 1.3x. So there's still some room. But compare that to the S&P 500's P/B of 4.5x – banks look cheap on a relative basis.
Focus on quality
I'd rather own money center banks like JPM and BAC over smaller regionals. They have diversified revenue streams and stronger capital ratios. For regionals, pick those with low exposure to commercial real estate (CRE) – that's the next shoe to drop.
Consider an ETF
If you want broad exposure, the KBW Bank ETF (KBWB) or the SPDR S&P Regional Banking ETF (KRE) work. But be selective – the regional ETF has more CRE risk.
Regional Banks vs. Money Center Banks: A Divergence
One thing that struck me is how the recovery split. Large banks (JPM, BAC, WFC) recovered within 4-6 months. Regional banks (like KeyCorp, Regions Financial) took 8-10 months and some still haven't fully recovered their pre-SVB highs. The chart of KRE versus BKX tells the story: a clear underperformance.
Why? Regional banks have higher exposure to office CRE loans and uninsured deposits. Even after the crisis, deposit costs have risen sharply for them, squeezing margins. The market is pricing in more pain ahead for regionals.
Risks Still Looming: What to Watch
I'm not popping champagne yet. Three risks keep me up at night:
- CRE loan defaults: Office vacancies are high, and many loans mature in the next two years. Regional banks hold a disproportionate share. Delinquencies are rising.
- Regulatory tightening: The Fed's proposed Basel III capital requirements could force banks to hold more capital, reducing ROE. Even if watered down, it's a headwind.
- Rate cuts: The Fed is expected to cut rates later this year. While rate cuts help the economy, they compress net interest margins for banks. The market may have already priced in a soft landing, so any recession could hit bank earnings hard.
Frequently Asked Questions
* This article has been fact-checked against public market data and Bank of America's quarterly reports. Chart patterns described are from personal observation of BKX daily candles on TradingView.
