Goldman Sachs (GS) warned on Wednesday of economic ripple effects in the aftermath of the Silicon Valley Bank (SIVB) and Signature Bank (SBNY) busts.
The investment bank’s chief economist Jan Hatzius slashed his 2023 GDP forecast by 0.3% in a new note out Wednesday afternoon. Hatzius is now looking for full-year GDP growth of 1.2%.
“The macroeconomic impact of a pullback in lending will remain highly uncertain until the extent of the stress on the banking system becomes clear,” Hatzius wrote.
Silicon Valley Bank’s collapse last Friday marked the second-largest bank failure in the U.S., behind only Washington Mutual during the Great Recession. Signature Bank’s demise was the third-largest bank failure in history.
The turbulent situation caused regulators to spring into action to prevent a banking crisis and mass tech layoffs, which is what likely would have happened if left unaddressed, sources told Yahoo Finance.
A joint statement from U.S. Treasury Secretary Janet Yellen, Fed chief Jerome Powell, and FDIC chair Martin Gruenberg on Sunday said depositors would have access to all of their money from the stricken banks.
Still, the impact of the collapses on bank lending is wildly unknown. The drama playing out this week at struggling Credit Suisse is not helping sentiment either.
Credit Suisse stock hit fresh lows Wednesday as the company’s largest shareholder — Saudi National Bank — said it would not provide further financial support. That sent the investment bank’s executives out into the market to try and reestablish confidence, with little to show for the efforts.
Hatzius thinks the barrage of negative headlines could weigh on lending and, by extension, economic growth.
“U.S. policymakers have taken aggressive steps to shore up the financial system, but concerns about stress at some banks persist,” Hatzius explained. “Ongoing pressure could cause smaller banks to become more conservative about lending in order to preserve liquidity in case they need to meet depositor withdrawals, and a tightening in lending standards could weigh on aggregate demand.”
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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