First Republic Bank’s Stock Plummets Amid SVB Crisis, Rescued by 11 Top Lenders
By On Thursday, First Republic Bank's stock plummeted as much as 36% before trading was paused for volatility.[0] The bank has since pared all those losses, with a 10% surge before the pause, as it explores strategic options including a possible sale.[0] The lender's stock has taken a nosedive after regulators took control of Silicon Valley Bank and Signature Bank in the last seven days.[0]
Since March 8, when the Silicon Valley Bank (SVB) crisis began, the bank’s market capitalization has fallen from $21 billion to less than $5 billion.[1] S&P Global and Fitch both reduced the rating of First Republic on Wednesday, mentioning liquidity and funding risks as the reason.[2]
On Sunday, First Republic announced that it had obtained $70 billion of additional funding from the Federal Reserve and JPMorgan Chase following the sharp decline of its stock price due to Silicon Valley Bank's collapse.[2]
Facing the possibility of investors and depositors withdrawing their funds, the U.S. government sanctioned a bank-to-bank bailout for First Republic Bank.[3] In an effort to ease worry about the state of the United States' financial system, the largest banks in the country are investing $30 billion into First Republic Bank, a San Francisco-based lender that is struggling.[4]
The 11 top lenders involved in the rescue announced in a joint statement that the move “demonstrates the resilience of the banking system,” Treasury Secretary Janet Yellen also reassured lawmakers that “Americans can feel confident that their deposits will be there when they need them.”[5]
First Republic has a large amount of uninsured deposits above the $250,000 government insured limit, with around 68% of its domestic deposits exceeding the FDIC’s insurance limit.[6] On Wednesday, Fitch Ratings downgraded the bank's credit rating due to investors' uncertainty concerning its prospects.[4]
The bank announced on Wednesday that it would take advantage of a lifeline from the Swiss National Bank and borrow up to 50 billion Swiss francs ($53.7 billion), after its stock experienced a drop of as much as 30%.[7] The company announced that it would repurchase some of its existing debt.[8]
A joint statement released by Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, FDIC Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu declared that the actions taken by the 11 leading lenders show “the resilience of the banking system,”
0. “First Republic may get a $30 billion rescue from rival banks after teetering on the brink following Silicon Valley Bank’s collapse” Fortune, 16 Mar. 2023, https://fortune.com/2023/03/16/first-republic-30-billion-rescue-deposits
1. “Biggest US banks weigh rescuing First Republic as its shares tumble – report” The Guardian, 16 Mar. 2023, https://www.theguardian.com/business/2023/mar/16/first-republic-biggest-us-banks-weigh-rescue
2. “SVB crisis: First Republic Bank is looking at a possible sale, per BBG” Business Insider, 15 Mar. 2023, https://www.businessinsider.com/svb-crisis-first-republic-bank-possible-sale-ratings-junk-2023-3
3. “First Republic Bank getting bailed out by large banks” The Hill, 16 Mar. 2023, https://thehill.com/business/economy/3903884-first-republic-bank-getting-bailed-out-by-large-banks-report
4. “Big lenders to inject billions of dollars into embattled First Republic Bank” POLITICO, 16 Mar. 2023, https://www.politico.com/news/2023/03/16/big-lenders-to-inject-billions-of-dollars-into-first-republic-bank-00087451
5. “First Republic shares surge on reports that big banks may shore it up” CBS News, 16 Mar. 2023, https://www.cbsnews.com/news/first-republic-bank-stock-price
6. “First Republic Bank stock tumbles on credit downgrade and deposit worries” CNN, 15 Mar. 2023, https://www.cnn.com/2023/03/15/investing/first-republic-downgrade/index.html
7. “Treasury yields rise as traders weigh a potential First Republic rescue” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/us-treasury-yields-investors-mull-over-stock-market-outlook.html
8. “Credit Suisse: Why it's struggling and why that's a big deal” CNN, 16 Mar. 2023, https://www.cnn.com/2023/03/16/investing/why-credit-suisse-is-struggling/index.html
