The American Banking Landscape Is On The Cusp Of A Seismic Shift. Expect More Pain To Come

• As the dust settles from a string of government seizures of failed midsized banks, the forces that sparked the regional banking crisis in March are still at play.
• Rising interest rates will deepen losses on securities held by banks and motivate savers to pull cash from accounts, squeezing the main way these companies make money. Losses on commercial real estate and other loans have just begun to register for banks, further shrinking their bottom lines. Regulators will turn their sights on midsized institutions after the collapse of Silicon Valley Bank exposed supervisory lapses. 
• What is coming will likely be the most significant shift in the American banking landscape since the 2008 financial crisis. Many of the country’s 4,672 lenders will be forced into the arms of stronger banks over the next few years, either by market forces or regulators, according to a dozen executives, advisors and investment bankers who spoke with CNBC.
• After 10 straight rate hikes and with banks making headline news again this year, depositors have moved funds in search of higher yields or greater perceived safety. Now the too-big to-fail-banks, with their implicit government backstop, are seen as the safest places to park money. Big bank stocks have outperformed regionals. JPMorgan shares are up 7.6% this year, while the KBW Regional Banking Index is down more than 20%.
• Compounding the industry’s dilemma is the expectation that regulators will tighten oversight of banks, particularly those in the $100 billion to $250 billion asset range, which is where First Republic and SVB slotted.
• “Higher fixed costs require greater scale, whether you’re in steel manufacturing or banking,” he said. “The incentives for banks to get bigger have just gone up materially.” Half of the country’s banks will likely be swallowed by competitors in the next decade, said Chris Wolfe, a Fitch banking analyst. In the meantime, banks are already seeking to unload assets and businesses to boost capital, according to another veteran financials banker and former Goldman Sachs partner. 

(Source: CNBC)