Shares of First Republic Bank (FRC) fell a record 62% to close at $31.21 on Monday, despite measures by US regulators to boost confidence in the banking system following the collapse of the Silicon Valley bank.
Shares of First Republic and other regional lenders were barred from volatility during the trading session amid fears of a bank transition. Shares of Western Alliance (WAL) fell 47%, while PacWest Bancorp (PACW) and Zions Bank Corporation (ZION) closed their session lows, down 21% and 25%, respectively.
first republic on sunday assured that it has secured additional liquidity From the Federal Reserve Bank and JPMorgan Chase.
“Total available, unused liquidity to fund operations now exceeds $70 billion,” said First Republic, which is also eligible for the new bank term funding program announced by the Federal Reserve on Sunday.
First Republic’s uninsured deposits totaled $119.5 billion at the end of 2022, or 67% of its total deposits, according to its financial statements.
Analysts at Raymond James, Compass Point and Wolfe Research downgraded First Republic on Monday, while others slashed their price targets on the stock. However, JP Morgan reiterated its overweight rating and said that this is a buying opportunity.
First Republic’s liquidity was clamped by regulators last Friday after San Francisco-based peer Silicon Valley Bank, formerly owned by SVB Financial (SIVB), as depositors flocked to withdraw their money from the bank. Many of the Silicon Valley bank’s clients were startups and venture capital firms, with accounts ever exceeding $250,000, an amount typically insured by the Federal Deposit Insurance Corporation, or FDCI.
On Sunday, the financial regulator said depositors of SVBs would be made whole, and announced new features to prevent deposit withdrawals in the banking system.
“Today, we are taking decisive action to protect the American economy by strengthening public confidence in our banking system,” US Treasury Secretary Janet Yellen, Fed chief Jerome Powell and FDIC Chairman Martin Gruenberg said in a joint statement.
The regulators also announced a systemic risk exception for Signature Bank (SBNY), which was struck off by its state chartering authority on Sunday.
The measure may not be enough to calm concerns about liquidity for all banks, especially regional banks that do not have to undergo the same stress tests and regulations as the country’s largest lenders.
“Risk and fear are still very much alive in this market,” David Allison of Hennessy Large Cap Financial told Yahoo Finance Live. “With the electronic nature of the banking system now, people can withdraw money much faster.”
“It’s not people lining up outside to take out $20,” he said. “It’s people calling, going on the internet, and getting millions of dollars out very quickly. So this liquidity issue is bigger than the Fed expected. There will be a struggle going forward here.
Ines is a Senior Business Reporter for Yahoo Finance. follow him on twitter @ines_ferre
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