KBRA Financial Intelligence

Market Volatility Scores for the Largest U.S. Public Banks

The March 2023 bank runs raised concerns over liquidity and solvency, resulting in significant stock price declines and heightened market fluctuations. Although banks experienced volatility following the runs, many of the largest banks have since stabilized, as indicated by KFI’s Large Bank Market Volatility Index (MVI).

Citigroup, Inc. (NYSE: C) emerged relatively resilient amid the runs, peaking with a Market Volatility Score (MVS) of only 8 in March 2023 and stabilizing near 0 since August 2023. In comparison, the Large Bank MVI reached a high of 41 and has since declined to around 14 as of July 10, 2024.

In contrast to Citigroup, Citizens Financial Group, Inc. (NYSE: CFG) was among the top 10 banks with the highest MVS as of July 10, 2024. Its MVS is currently at 43, surpassing the Large Bank MVI peak of 41 in March 2023.

The new KFI market-based model offers insights into the volatility of public banks, serving as an early warning sign for potential defaults. The Market Volatility Score and Market Volatility Index were developed in response to client demand for timely risk assessments following the March 2023 bank runs. Both MVS and MVI assess the risk of public lenders from 0 (stable) to 100 (volatile) for real-time comparative peer tracking and complement our quarterly KFI Scores.

Highlights of KFI’s new market-based model:

• Rooted in the foundational theories of three default risk models (Merton, KMV, and Bharath & Shumway), but tailored to the volatility and intricacies of the banking industry

• Contains a wide variety of inputs, including stock price, deposits, and market capitalization, among others

• Assesses whether a bank’s default risk is above or below the average of its peer group

• Developed with contributors from New York University and historically tested against more than 400+ public banks

Interested in learning more about KFI’s Market Volatility Score? Please contact: [email protected] for more details!

2Q 2024 Bank Call Report Data Is Rolling Out!

As of July 11, almost 200 banks have filed their call reports for 2Q 2024. Reported data is available via the KFI web application and KFI Excel add-in within 24 hours after banks file. Don’t forget to refresh your Excel templates regularly to check if your banks have filed for 2Q.