The financial world was thrown into turmoil as shares of regional banks and financial firms continued to tumble, with First Republic Bank (FRC) taking a massive hit of about 60% in premarket trading on Monday. Despite the bank’s efforts to shore up its balance sheet and the aggressive federal response to protect depositors at Silicon Valley Bank and Signature Bank, investors remain nervous.
The collapse of Silicon Valley Bank last week has left investors on high alert for banks with similar issues, resulting in PacWest Bancorp (PACW) also tumbling by 35% in premarket trading, while Charles Schwab (SCHW) lost 8%. The situation has caused uncertainty in the financial markets and has led to increased fears of a financial crisis.
To restore investor confidence, First Republic announced fresh funding from the Federal Reserve and JPMorgan Chase (JPM) on Sunday to strengthen its balance sheet. With this move, First Republic now has $70 billion in unused liquidity, which it can use to respond to potential customer withdrawals. Despite the plunge in its stock prices, the bank’s senior executives reassured customers of the safety and stability of First Republic, emphasizing the strength of its capital, liquidity, and operations.
The federal bank rescue announced on Sunday is expected to ease some of the pressure on the banking system. However, Isaac Boltansky, director of policy research at BTIG, warns that this is not a permanent solution and that this will not be the final chapter in this story. The situation highlights the need for financial institutions to be transparent and communicative with their customers to help alleviate fears and prevent further panic in the market.
Source: https://edition.cnn.com/2023/03/13/investing/first-republic-bank/index.html