Concerns about the nation’s banking system hit home in Metro Detroit over the past few days.
A big rating service threatens to downgrade Comerica Bank, where so many Metro Detroiters keep their money.
Comerica Bank and other regional banks appeared on Moody’s Investors Service Radar.
Moody’s watches public companies, those selling stock, to gauge financial health. To date, it is believed Comerica Bank was in average shape.
Yet, in a statement, it said, “The review for downgrade reflects the extremely volatile funding conditions for some us banks exposed to the risk of uninsured deposit outflows.”
That $250,000 insured limit could lead to troubling consequences.
“If it were to face higher-than-anticipated deposit outflows, the bank could need to sell assets or raise cash to cover possible losses,” said Moody’s Investors Service Radar.
Sowerby says depositors should be fine.
“Now, importantly, I think for the depositors they will be just fine,” Sowerby said. “They’ll be in good shape. Nobody needs to have a concern about the safety of your deposits.”
Comerica employs nearly 4,500 people across the state, with 188 branches. Sowerby believes banks like Comerica are leaning into the wind now.
“This is all the byproduct of high inflation and high-interest rates,” Sowerby said. “We saw this in the banks in the late 1970s and early 1980s indeed when banks had to mark their assets down when interest rates went higher.”
Comerica said in a statement: “We do not feel the recent events are reflective of the overall health of the banking industry. Rest assured, Comerica remains open for business as usual, with our continued priority focused on taking care of our customers.”
In the end it’s the stock and bondholders and the investors who are in immediate trouble financially. Comerica stock dropped $16 a share Monday. Today it recovered some of those losses. David Sowerby says in cases like this, and it’s buyer beware. So know what you own.
Sowerby also said he sees more banking regulation down the road, making it more difficult for banks to make a profit. So be very careful when investing in this sector.