US Big Banks Unite to Support First Republic Bank with $30 Billion in Aid
First Republic Bank (NYSE: FRC) shares tumbled again on Friday, set for their worst week ever, as sentiment around the lender remained fragile even after proposals for $30 billion of aid from Wall Street’s biggest banks. The bank announced on Thursday that it will suspend its dividends and receive uninsured deposits from Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank.
Janet Yellen, Treasury Secretary for the United States, Jay Powell, Chair of the Federal Reserve, and other senior regulators released a joint statement expressing their approval of the collective demonstration of strength by a number of major banks, asserting that it proves the strength of the banking system.
The conduct of America's major banks demonstrates their faith in the nation's banking system. Utilizing our financial assets and liquidity, we are working in unison to supply what is most required by the greater system. Millions of jobs, local customers and businesses, and communities that are uplifted – these are all benefits of smaller- and medium-sized banks. All of America's major banks are working together to bolster the economy and the people within it.
Major U.S. bank stocks fell on Friday, less than a day after joining forces to funnel $30 billion worth of deposits into First Republic. A slew of regional bank stocks fell before the bell Friday, led to the downside by a roughly 20% drop in shares of First Republic. On Friday, PacWest Bancorp dropped as much as 15%, Western Alliance Bancorp declined 12%, and KeyCorp decreased 6%. Other regional banks experienced similar losses. The SPDR S&P Regional Banking ETF plummeted to a low of 4.4%.
First Republic's stock prices have been heavily affected in the past few days, due to the downfall of Silicon Valley Bank on Friday and Signature Bank over the weekend. This news is a result of that. Given the large quantity of uninsured deposits in both banks and First Republic, there was fear that customers would withdraw their funds.
As of March 15th, First Republic had an estimated cash balance of $34 billion, which did not include the $30 billion of uninsured deposits held by the major banks.
0. “Markets Today: Stocks Slip as Market Sentiment Remains Fragile” Barchart, 17 Mar. 2023, https://www.barchart.com/story/news/15155523/markets-today-stocks-slip-as-market-sentiment-remains-fragile
1. “11 banks sweep in with a $30 billion rescue of First Republic Bank” NPR, 16 Mar. 2023, https://www.npr.org/2023/03/16/1163958533/first-republic-bank-silicon-valley-bank-signature-bank-bank-run
2. “FTSE 100: Stocks rise US banks deposit $30bn to rescue First Republic” Yahoo News, 17 Mar. 2023, https://news.yahoo.com/ftse-100-stocks-rise-as-us-banks-deposit-30bn-to-rescue-first-republic-090247410.html
3. “First Republic Gets $30 Billion Lifeline from JPMorgan, Citi, Bank of America, Wells Fargo” Investopedia, 16 Mar. 2023, https://www.investopedia.com/first-republic-s-usd30b-rescue-by-jp-morgan-citi-and-bank-of-america-7367932
4. “Stock market news today: Stocks lower as First Republic weighs on banks” Yahoo News, 17 Mar. 2023, https://news.yahoo.com/stock-market-news-today-march-17-2023-123151709.html
5. “Dow drops 400 points as First Republic's slide rattles Wall Street: Live updates” CNBC, 17 Mar. 2023, https://www.cnbc.com/2023/03/16/stock-market-today-live-updates.html
6. “First Republic Rout Resumes as Rescue Package Fails to Stem Drop” Yahoo Finance, 17 Mar. 2023, https://finance.yahoo.com/news/first-republic-shares-resume-slide-085232023.html
7. “Wall Street rides to the rescue as 11 banks pledge First Republic $30 billion in deposits” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/group-of-financial-institutions-in-talks-to-deposit-about-20-billion-in-first-republic-sources-say.html
8. “FRC Tanks after it Suspends Dividends” TipRanks, 17 Mar. 2023, https://www.tipranks.com/news/frc-tanks-as-it-suspends-dividends