What happened

Bank of America (BAC -0.38%) took a big hit in March, as its stock price sank 16.6% during the month, according to S&P Global Market Intelligence. The stock is currently trading at around $28 per share as of April 6, down about 15.8% year to date.

Conversely, the major market indexes were all up in March, as the S&P 500 gained 3.5%, the Dow Jones Industrial Average was up 1.9%, and the Nasdaq Composite rose 3.5% for the month.

So what

It was a difficult month for bank stocks across the board, as the largest bank failure since the Great Recession took place, which caused a panic that brought down another bank and severely impacted institutions across the industry. A lot has been written about the failure of SVB Financial's Silicon Valley Bank and Signature Bank, as well as the winding down of Silvergate Capital, so I won't go into detail about their demises. However, actions taken by federal regulators to support other struggling banks appear to have stabilized the market and prevented any other failures. 

This meltdown clearly had an impact on banks throughout the industry, including Bank of America

But this crisis is quite different from the one that brought down Washington Mutual in 2008. Large banks like Bank of America in fact saw deposit inflows, as customers transferred their deposits from the affected banks, as well as other smaller, regional banks, to the large banks in a flight to stability. 

In addition, the large banks are forced to adhere to strict liquidity standards and pass stress tests to handle any market shocks, like the one we saw in March. Banks with less than $250 billion in assets are not required to meet the same liquidity standards -- and lack of liquidity was a major cause of these failures.

Now what

While Bank of America was able to weather the March storm, there are dark clouds on the horizon in the form of a potential recession. A couple of analysts lowered the bank's price target this month, including Morgan Stanley, to $31 per share, as well as RBC Capital to $34 per share.

The analysts cite a possible economic slowdown or recession, which could result in a drop in lending activity, higher charge-offs and provisions for credit losses, and accelerating deposit betas, which could all drag on earnings.

Stay tuned for more when Bank of America reports first-quarter earnings on April 17.