First Republic shares surge on reports that big banks may add deposits

Shares of First Republic Bank went on a wild ride Thursday, plunging as much as 36 percent in early trade before rallying as much as 22 percent later in the day, amid reports that the major bank is pushing for a regional financial institution. You can step in.

The sudden arrival of Silicon Valley Bank (SVB) changes the stock. to fall Friday raises concerns about the financial health of regional lenders. First Republic, with $212 billion in assets under management, has seen its market value drop from $22 billion in January to less than $7 billion.

First Republic shares rose $3.90, or 13%, to $35.06 in early afternoon trading after touching an intraday high of $38. They had fallen as low as $19.80 earlier in the day.

The similarities between First Republic, founded in San Francisco in 1985, and the $210 billion SVB go beyond size. As with its neighbor, a significant portion of First Republic’s deposits are uninsured, making it highly vulnerable to customer withdrawals.

On Thursday, major financial institutions — including Citigroup and Wells Fargo — were in talks to pool billions of their assets into First Republic to push it forward. The Wall Street Journal Reported. Big banks could contribute $30 billion to stabilize the bank, According to To Bloomberg News. Media outlets reported that a deal could be announced as soon as today.

First Republic said a new round of capital would come on top of the additional cash reserves. added from the Federal Reserve and JPMorgan Chase earlier this week.

Moody’s downgraded First Republic’s credit rating this week, with the agency noting that the bank has less cash than other lenders of its size. In a research note, the credit rating agency noted that First Republic is “more susceptible to rapid and large withdrawals from depositors” than other banks.

“If it experiences higher-than-expected deposit outflows and liquidity backstops prove inadequate, the bank may need to sell assets, thereby crystallizing unrealized losses,” Moody’s said. Moody’s said.

First Republic did not respond to a request for comment.

CEO Mike Roeffler said earlier this week that the bank has “very strong” capital, with $70 billion available for operations.

Pacific West, Zions, Western Alliance and other regional banks saw their stocks fall this week after the sudden takeover of SVB by financial regulators spooked investors. Many of those stocks came back down on Tuesday after President Biden. assured the Americans They could count on the American banking system, and regulators promised that all deposits at SVB would be available to customers.

Treasury Secretary Janet Yellen on Thursday Tried to allay concerns. Testimony before the Senate Finance Committee on the stability of US banks.

“I can assure members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she told lawmakers. will.” “This week’s actions demonstrate our strong commitment to ensure that depositors’ savings remain strong and depositors’ savings are protected.”