Blackrock CEO warns of US regional banking risks after SVB collapse saying inflation to persist and rates to rise
Per Reuters
Blackrock CEO Laurence "Larry" Fink shared in an annual letter that he expects interest rates to rise even more and that the US regional banking sector remains at risk after Silicon Valley Bank collapsed.
The CEO expects inflation to persist and rates to continue to rise, and in the annual letter, he noted that the situation resulted from "easy money." He expects "liquidity mismatches" to come after the regional banking crisis.
Fink expects the Feds to raise interest rates even more despite already hiking rates by around 500 basis points. The Federal Reserve increased rates as its way to try and fight against inflation.
The current market situation reportedly resulted in exposure to hard-to-sell, higher-yielding investments due to low rates. Fink gave a statement saying the bond market was down by 15% in 2022 and that it was "quiet, too quiet," a saying used in old Western movies when the surroundings are suspiciously calm.
Fink: “Something else had to give as the fastest pace of rate hikes since the 1980s exposed cracks in the financial system."
Fink also noted that he wasn't sure if the current situation with rising interest rates would result in more victims popping up. However, he did note that banks will start to pull back on lending to support their balance sheets, saying this was inevitable.
Fink: “It’s too early to know how widespread the damage is... The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge.”
Recently, the Swiss National Bank reported its highest annual loss since its existence 115 years ago. The bank reportedly lost $148.4 billion since the start of 2022.
Goldman Sachs increased its 12-month US probability estimations by 10% from 25% to 35%. This was a reversal of its estimations last month, which dropped from 35% to 25% amid market conditions.
See flow at unusualwhales.com/flow.
Other News:
- The Swiss National Bank has reported an annual loss of $141.54 billion
- Goldman Sachs increases 12-month US recession probability by 10%, now at 35%
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