- The struggles for regional bank stocks continued despite U.S. regulators over the weekend announcing additional support.
- First Republic had the third-highest rate of uninsured deposits among U.S. banks, behind SVB and Signature Bank, which was shut down by regulators over the weekend, according to a note from Raymond James.
- First Republic’s stock was down nearly 75% in March as of Wednesday’s close, and the bank’s debt was downgraded by S&P Global Ratings and Fitch Ratings.
Traders gather at the post where First Republic Bank stands as the stock can no longer be traded on the floor of the New York Stock Exchange (NYSE) in New York, March 15, 2023.
Brendan McDermid | Reuters
Shares of First Republic and several other regional banks came under pressure again on Thursday as the Swiss National Bank’s decision to consolidate Credit Suisse did little to allay fears of further mid-state bank failures. -United.
The First Republic fell more than 25% in premarket trade. PacWest fell more than 15% and Western Alliance fell about 9%.
The collapse of Silicon Valley Bank last Friday left investors scrambling to identify other regional banks that have similar balance sheet issues, namely a high rate of uninsured deposits and long-term bonds or loans. .
First Republic had the third-highest rate of uninsured deposits among U.S. banks, behind SVB and Signature Bank, which was shut down by regulators over the weekend, according to a note from Raymond James. First Republic’s stock was down nearly 75% in March as of Wednesday’s close, and the bank’s debt was downgraded by S&P Global Ratings and Fitch Ratings.
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First Republic shares have been under pressure since the collapse of SVB.
Thursday’s decline for the First Republic came even as Bloomberg News reported the bank was weighing its options to stabilize, including a potential sell-off. But a pressure sale might not be a good deal for shareholders, according to KBW analyst Christopher McGratty.
“Following the sharp decline in shares following the SIVB failure (deposit outflows/liquidity issues), FRC is admittedly in a difficult position. Any potential sale would likely be a difficult outcome for existing shareholders,” McGratty said in a note to customers.
The struggles for regional bank stocks continued despite U.S. regulators over the weekend announcing additional support. This included a new Federal Reserve program that allowed banks to exchange certain assets for cash without having to realize the losses in market value caused by higher interest rates. The SPDR S&P Regional Bank ETF (KRE) has fallen more than 11% this week.
The SPDR S&P Regional Bank ETF (KRE) was down another 1% in premarket trading on Thursday.
In addition to fears of further bank failures, the potential for increased regulation and smaller deposit bases for mid-sized banks could also hurt stocks as investors assess the regionals’ future earning power.
The banking system suffered another shock on Wednesday, when shares of Credit Suisse traded in Switzerland fell more than 20% on fears that the bank’s “material weakness” in its financial reports could force it to raise more capital . However, the Swiss National Bank has reached an agreement with Credit Suisse to allow the national bank to borrow up to around $54 billion.
But while Credit Suisse’s struggles could have ripple effects throughout the global banking system, the Swiss bank’s problems appear to be unrelated to U.S. regional banks.