Bank Stock Plunge: First Republic Bank Receives Federal Reserve and JPMorgan Support
On Monday, regional bank stocks suffered their largest decline in three years, with First Republic Bank shares plunging by more than 60%. The San Francisco-based bank reported that it had received additional liquidity from the Federal Reserve and JPMorgan, bringing its total available, unused liquidity to fund operations to more than $70 billion.[0] This excludes additional liquidity First Republic is eligible to receive under the new Bank Term Funding Program announced by the Federal Reserve.[1]
First Republic Bank CEO and President Mike Roffler and founder Jim Herbert said in a statement, “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks. As we have done since 1985, we operate with an emphasis on safety and stability at all times, while maintaining a well-diversified deposit base.[2]
Jim Herbert told CNBC's Jim Cramer that the bank was not seeing massive outflows of deposits and that the business was operating as usual.[3] Meanwhile, HSBC purchased SVB UK on Monday for one pound, according to PYMNTS.[4]
On Monday, President Joe Biden sought to reassure the American people that the nation's economic systems were secure, after the abrupt failure of two banks caused fears of a wider crisis.[5] He said he would ask Congress and regulators to strengthen banking rules to, “make it less likely this kind of bank failure would happen again.[6]
Investors had invested heavily into banks, hoping to gain from the Federal Reserve's swift increase of interest rates from 0 percent to 4.5 percent over the course of a year; however, the repercussions of this are now proving to be especially harsh.[7] The idea that higher rates usually bolster interest income is complicated in 2023, however, due to the steeply inverted yield curve that has caused yields on longer-term assets to be lower than short-term liabilities.[7]
On Monday, many of the large US banks were also showing declines, with Bank of America Corp., Citigroup Inc., and Wells Fargo & Co. all dropping 3% or more.[7] First Republic shares are down 65% as investors continued digesting the fallout from the collapse of Silicon Valley Bank, Silvergate and the latest victim – Signature Bank. The bank has been able to meet withdrawal demands on Monday with the help of additional funding from JPMorgan Chase.[3]
The joint statement by U.S.
0. “First Republic Bank shares under pressure amid woes regarding SVB, Signature collapse” Seeking Alpha, 13 Mar. 2023, https://seekingalpha.com/news/3946736-first-republic-bank-shares-under-pressure-amid-woes-regarding-svb-signature-collapse
1. “First Republic Bank Strengthens and Diversifies Liquidity | First Republic Bank” news.firstrepublic.com, 13 Mar. 2023, https://news.firstrepublic.com/news-releases/news-release-details/first-republic-bank-strengthens-and-diversifies-liquidity
2. “How the run on banks is affecting the mortgage market” HousingWire, 13 Mar. 2023, https://www.housingwire.com/articles/how-the-run-on-banks-is-affecting-the-mortgage-market
3. “First Republic tells CNBC the bank isn't seeing that many depositors leave, JPMorgan funding working” CNBC, 13 Mar. 2023, https://www.cnbc.com/2023/03/13/frc-tells-cnbc-the-bank-isnt-seeing-that-many-depositors-leave-jpm-funding-working.html
4. “First Republic Bank Says It’s Seeing ‘Business as Usual’” PYMNTS.com, 13 Mar. 2023, https://www.pymnts.com/digital-first-banking/2023/first-republic-bank-says-its-seeing-business-as-usual/
5. “First Republic targeted the rich including Mark Zuckerberg before stocks plunged amid SVB fallout” Daily Mail, 13 Mar. 2023, https://www.dailymail.co.uk/news/article-11854199/First-Republic-targeted-rich-including-Mark-Zuckerberg-stocks-plunged-amid-SVB-fallout.html
6. “Bank Crisis Widens As Signature Topples, Funding Props First Republic” Investor's Business Daily, 13 Mar. 2023, https://www.investors.com/news/bank-crisis-widens-as-signature-topples-funding-props-first-republic
7. “US regional banks remain under pressure as First Republic sinks” The Boston Globe, 13 Mar. 2023, https://www.bostonglobe.com/2023/03/13/business/us-regional-banks-remain-under-pressure-first-republic-sinks
