Markets are spooked as US banks experience a decline due to withdrawals

Following the worst banking crisis since 2008, US bank State Street has experienced an 18% decrease in its share price, as customers withdrew a net $26bn (£20.9bn) in the last three months.

This amount was taken out of the bank’s investment products in Q1, which was a surprise to analysts who had anticipated fresh inflows of deposits amounting to $8.4bn.

In premarket trading, State Street’s shares have dropped more than 11% following reports that clients withdrew a net $26bn (£20.9bn) from the bank’s investment products in the first quarter. This significant outflow was an unexpected miss, with analysts predicting $8bn in inflows for the same period.

State Street’s adjusted earnings for the three months ending in March came in at $1.52 per share, falling short of estimates of $1.64 per share. Despite a 1% increase in revenue from the previous year, fee revenue declined by 9%.

The bank’s assets under management also fell to $3.6trn, representing a 10% decrease from the same period last year.

The fall in State Street’s share price was its biggest intraday decline since the start of the pandemic in March 2020. Additionally, the disappointing results impacted other trust bank stocks, with Northern Trust’s shares dropping by 6%, and New York Mellon’s declining by 7.1%.

Another bank, Charles Schwab, also suffered in Q1, reporting a 30% decrease in deposits following the collapse of US lenders Silicon Valley Bank, Signature Bank, and Silvergate. Although customer deposits fell to $325.7bn (£262.1bn) as of March 31, these were in line with analysts’ projections, and its shares dropped by 0.8%.

At the start of another busy week of corporate earnings reports, US markets had a muted opening, with mixed results. The Dow Jones Industrial Average was unchanged at 33,887.79, while the broad-based S&P 500 was slightly down at 4,135.71.

The tech-heavy Nasdaq Composite also opened flat at 12,125.71. These earnings reports will provide insights into how businesses are performing following the banking crisis.

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