With the bankruptcy of Silicon Valley Bank and Signature Bank in the US, a cloud hangs over the banking system.
First Republic Bank Shares Plummet
The bad weather that started with the bankruptcies of Silicon Valley Bank and Signature Bank in the United States is increasing its severity. After the bankruptcies of first Silvergate Bank, second Silicon Valley Bank, and then Signature Bank was announced in the past week, First Republic Bank shares started to crash. First Republic Bank fell by 50% on the last day of last week.
As of Monday, the bank’s shares were down nearly 64%. Moreover, most of the bank’s shares were repeatedly halted during the day due to excessive volatility.
Additional Liquidity
According to the statement made by First Republic Bank, the financial position was further strengthened as additional liquidity was provided by JP Morgan Chase and the Fed. Despite this announcement, the bank failed to maintain the value of its shares.
The company’s founder, Jim Herbert, and CEO, Mike Roffler, said in a statement: “First Republic’s capital and liquidity positions are very strong and well above the regulatory threshold for well-capitalized banks.”
In addition, Jim Herbert, the company’s founder, said: “Our bank is business as usual, and I haven’t seen many depositors leave.”
Financial Stocks Under Pressure
The bad atmosphere after Silicon Valley Bank’s bankruptcy continues to be billed to other banks like First Republic Bank. First Republic shares in San Francisco plunged 75% on Monday after falling 33% last week. Regional bank stocks fell sharply, with PacWest Bancorp down 42% and Western Alliance Bancorp down more than 70%. Zions Bancorporation fell 24% and KeyCorp 27%. Other financial firms were also under pressure, with Bank of America down 3% and Charles Schwab down 14%.
The Silicon Valley Bank bankruptcy was recorded as the largest bankruptcy in the United States since 2008, with $212 billion in assets. First Republic Bank, whose share value dropped significantly, had reported assets of $ 213 billion as of December 31.
High Percentage of Uninsured Deposits
One of the major problems in this crisis was the high percentage of uninsured deposits. The reason was that a large number of the bank’s customers had no guarantee of getting their money back before the weekend’s legal settlement. With SVB’s high percentage of uninsured deposits, there are other medium-sized banks that could be at risk of large withdrawals.
Commenting on the issue to his clients, Citi analyst Keith Horowtiz said: “We believe regionals with less diversified and large uninsured deposit bases are at risk of deposit flight but not at the speed of SVB and they should have time to tap wholesale funding markets (such as FHLB) and raise cash levels. In a fragile environment like we are in, we believe banks should be cautious about the potential negative signaling effect of raising deposit rates to keep deposits,”
What is The First Republic Bank?
First Republic Bank is an American full-service bank and wealth management company that provides personal banking, commercial banking, trust, and wealth management services, serving low-risk, high-net-worth clients and focusing on providing personalized client experience. The bank specializes in providing personalized relationship-based service through preferred banking or trust offices throughout the United States, including San Francisco, New York City, Jackson, Wyoming, and other locations.
First Republic offers wealth management services through First Republic Wealth Advisors and First Republic Investment Management. Brokerage services are provided through First Republic Securities Company LLC, and Trust services are provided through First Republic Trust Company.
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