At Substantive Research, we aim to highlight the most valuable insights on key trending investment themes across the research market in 2023. This week, we flag analysts who sounded an early alarm on US regional banks:

Despite the emergence of problems with Silicon Valley Bank (SVB), few analysts had raised alarm bells about the risks associated with US regional banks prior to March. It was only after the collapse of SVB and the subsequent run on deposits at other regional banks that investors became fully aware of these risks. Although the KBW Nasdaq Regional Banking Index served as a proxy, there were hardly any warning signs as February came to a close and March began.

At Substantive Research, we are committed to curating and promoting research analysts who not only offer quality analysis but are also prescient in their work. As ongoing research on this topic continued, we made it a point to flag any timely findings.

On February 21, a piece by Steve Blitz at TS Lombard titled “Is a small bank problem brewing” caught our attention. While the piece didn’t reveal the weaknesses in risk management practices, it did delve into the vulnerabilities of regional bank funding models, which was a critical red flag to what has subsequently unfolded. However, it took another ten days for the KBW Nasdaq Regional Banking Index to go into free fall.

On March 10, as SVB tried to raise new capital and panic set in, the question on every investor’s mind was the extent to which the sector was exposed to unrealized losses on Available-for-Sale (AFS) versus Held-to-Maturity (HTM) bank portfolios. The size and scope of this impending problem remained uncertain.

That afternoon, Jacob Liu from Toronto-based Veritas Investment Research published an incredibly detailed piece for the firm’s clients. Liu and his team poured over Federal Deposit Insurance Corporation filings, reviewed 4,773 FDIC-insured filers’ government datasets, and identified other financial institutions with sizable unrealized mark-to-market losses well before banking supervisors published a similar result a week later.

This was impressive and timely work, which we also flagged to our clients late Friday. Veritas clients received a comprehensive spreadsheet containing all 4,773 financial institutions and their key risk determinants to navigate the situation that weekend.

As curators of quality, high-relevance investment research, we understand that investors value ”optionality” in their research supply. This comes at a cost, however, a cost that many investment firms are unwilling to bear. Often, it’s not until you need something that you realize its importance. The US regional bank crisis and the downfall of Credit Suisse in Europe are perfect examples of this. This is why we offer the Research Discovery service, which provides investors with that optionality as well as the flexibility to access quality and relevant research when they need it most. If you’re interested in learning more, please don’t hesitate to reach out to us.

The full list of Substantive Research’s top trending themes in the past week is as follows:

  • European Banks
  • Fed Policy
  • US Deposit Guarantees
  • Credit
  • Coco Bonds

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With access to more than 250 research providers globally, across all asset classes, Substantive Research is a research aggregator with a difference. Our experienced team of curators filters and selects only the highest quality research, tracks the most relevant themes, then tags them in an intuitive manner. Another key difference between Substantive and other research aggregation platforms is that we pre-permission access to all of the research for you. For more visit our Research Discovery service below.