First Republic Bank shares plummet as banking fallout fears spread

Despite the Biden administration’s emergency measures to protect customer deposits, Wall Street’s trust in regional banks remained weak on Monday.

Highlights

• First Republic were off more than 65% and trading was halted
• First Republic said Sunday it had received additional liquidity from the Federal Reserve and JPMorgan Chase.
• Biden says Americans can “rest assured” banking system is secure after SVB collapse

Early this morning, trades in First Republic Bank were halted due to volatility after the company’s shares dropped sharply. It Indicates that despite government efforts over the weekend to manage the Silicon Valley Bank crisis and any potential knock-on repercussions, investors are worried about the financial institution. The stock market selloff that predicted SVB’s failure before the volatility, which persists among experts and the larger tech community as concern of contagion.

San Francisco’s First Republic shares lost 52% on Monday after declining 33% last week As regional bank stocks sank substantially, PacWest Bank plunged by 24% and Western Alliance Bancorp lost more than 40%. KeyCorp dropped 26%, while Zions Bancorporation lost 18%. Other financial institutions were also experiencing pressure; Charles Schwab fell 9% and Bank of America fell 4%.

First Republic Bank shares dropped more than 65% in early trade

Only one day after the business announced it had increased its cash reserves, shares of First Republic, a regional bank with $213 billion in assets and 7,200 employees and headquarters in San Francisco, dropped more than 65% in early trade. According to First Republic, the Federal Reserve and JPMorgan Bank provided the capital infusion.

What Bank CEO said

In a statement on Sunday, CEO Mike Roffler said the bank “continues to fund loans, process transactions and fully serve the needs of clients.” Seeking to reassure investors and depositors, he also said the company’s “capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks.”

He added, “First Republic has more than $70 billion available in unused funds”

Impact on other Regional Bank Stocks

Several regional banks’ stocks, such as Zions, Pacific West, and Western Alliance, were also negatively impacted on Monday. In response to the regulators’ takeover of Silicon Valley Bank (SVB) and New York’s Signature Bank, trade was stopped at more than a dozen regional banks on Monday as prices fell further.

In the upcoming days, investors will be recalculating their perception of risk and reward, according to Bank of America analysts, who expect regional bank stock volatility to continue challenging in the short term.

They said in the report “The events of the last few days are likely to worsen the funding cost pressure that the industry was already facing,”  continue to report  “No bank is immune, but this pressure will likely be most pronounced among banks with a larger mix of rate sensitive customers.”

The California Department of Financial Protection and Innovation said

The SVB was handed over, according to the California Department of Financial Protection and Innovation, because the bank had “inadequate liquidity and insolvency.” The failure of the bank, which occurred at the height of the financial crisis in 2008, was the worst financial institution failure since Washington Mutual. Federal Deposit Insurance Corporation now has control of SVB after Janet Yellen, the U.S. Treasury Secretary, ordered it to start ensuring depositors’ complete access to their money on Monday.

withdrawing money from SVB is one thing, but according to Wedbush Securities analyst Dan Ives, “the bigger and more disturbing issue” is how this will affect the startup and venture capital communities in the future.

Biden promise to take all necessary action

President of the United States Joe Biden vowed to take all necessary action to address a potential banking crisis. The United States Federal Reserve and JPMorgan obtained additional financing for First Republic, giving it access to a total of $70 billion in capital, on Sunday as part of extraordinary measures taken by national regulators to maintain confidence in the system.