Banking fears reignited on Wall Street as HSBC chief claims crisis is over

Fears of a US banking crisis were reignited on Tuesday after shares in two regional lenders plummeted following the failure of First Republic.

PacWest, a Californian lender, saw trading in its shares suspended after the stock plunged as much as 39pc, while Arizona’s Western Alliance fell by more than a fifth.

The steep drops stoked concerns about a crisis of confidence in the US banking system and led to calls for the Federal Reserve to stop raising interest rates.

Ten Congressmen on Tuesday wrote to Jerome Powell, chairman of the US central bank, urging him to pause interest rate hikes at the Fed’s meeting later this week to “avoid engineering a recession that destroys jobs and crushes small businesses”.

HSBC’s chief executive Noel Quinn played down concerns about the health of the global banking system after JP Morgan was forced to step in to rescue California’s First Republic, the third US lender to fail in two months.

He said: “We’re pleased that there was a resolution on First Republic at the weekend so that that situation has been resolved.

“We do not believe there is a global banking crisis on the horizon. We think there are some challenges that have been evidenced in some of the regional banks in the US, but we do not believe that’s systemic in the US, or across all banks.”

Intense focus on PacWest and Western Alliance came after regulators seized beleaguered regional bank First Republic over the weekend and sold it to Wall Street giant JP Morgan. It was the second largest banking failure in the US since Washington Mutual in 2008.

Both PacWest and Western Alliance have faced scrutiny owing to their similarities with Silicon Valley Bank (SVB), which collapsed in March, and First Republic. All have a high proportion of uninsured deposits.

PacWest, which is regarded as one of the weakest of the mid-sized regional banks, struggled following the collapse of SVB. Deposits at the Beverly Hills-headquartered bank fell by more than $5bn to $28.2bn (£22.6bn) during the first three months of the year.

Last week it said deposits had stabilised following a flurry of withdrawals.

Mr Quinn’s reassurances about the health of the global banking system came as HSBC reported a tripling in profit thanks to rising interest rates.

The FTSE 100 bank reported pre-tax profits of $12.9bn for the first three months of the year, up from $4.1bn during the same period last year.

HSBC’s net interest margin – the gap between what the bank pays savers and what it charges borrowers – jumped 0.5 percentage points to 1.69pc.

MPs have accused retail banks of taking advantage of soaring interest rates to bolster their own profits at the expense of customers.

Harriett Baldwin, chairman of the Treasury Committee, said banks were “relying on inertia by their most loyal customers to drive higher profits.”

She said: “As a Committee, we will continue to pay close attention to the banks’ results and we will continue to press for further action in this area.”

Last month, the City watchdog challenged bank bosses who were being miserly with their savings rate increases and warned of “onerous interventions” if they continued to fail to pass on rate rises to savers.

Some instant access savings accounts pay as little as 0.7pc interest. HSBC’s basic easy access account pays a standard rate of 1.3pc annually.

HSBC booked a provisional $1.5bn profit from its government-engineered rescue of SVB UK, the bank said on Tuesday. Mr Quinn said the bank plans to expand the SVB unit in Hong Kong, elsewhere in Asia and potentially in Israel, adding that there were “no nasty surprises” hidden with the bank that it bought for £1.

Mr Quinn and his colleagues are preparing to face activist shareholders at the bank’s annual meeting in Birmingham on Friday, with its largest investor calling for the lender to spin off its Asian business from the rest of its operations.