Shares of the US regional lender fell 67% to $27.08 before trading was halted for volatility.
First Republic secured additional funding on Sunday through JPMorgan Chase & Co and the Federal Reserve, giving it access to a total of $70 billion in funds through various sources.
The bank’s liquidity strengthened overnight, “but the real problem for the sector is that there is a crisis of confidence in the adherence of deposits and when that is dislocated, things can move very quickly,” Christopher said. McGratty of investment bank KBW.
Despite the liquidity injection, Raymond James downgraded the bank’s shares two notches to “neutral”, highlighting the risk of outflows First Republic faces from large depositors following the bank run on SVB.
Although the bank is better positioned for possible deposit outflows than it might have been before the additional funding, if there are net deposit outflows, it will reduce First Republic’s earning power, Raymond analyst David Long wrote in a note. James.
US authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank threatened to unleash a broader financial crisis.. State regulators also closed New York’s Signature Bank and guaranteed deposits at both institutions.
“The market seems to think there is going to be more tension. The question is when is it going to be self-fulfilling,” McGratty said.
Traders and analysts indicated that the panic could push people to move funds from smaller banks to the perceived safety of large banks.
The collapse of Silicon Valley and the first reaction of the Fed
Federal authorities closed Silicon Valley Bank last Friday and seized its deposits in the largest bank failure in the United States since the 2008 financial crisis. This collapse, according to some experts, is also the second largest bank failure in history.
Following these events, many analysts predict that the Federal Reserve (Fed) will give a swerve in its monetary policy. Goldman Sachs said it sees no reason for the Federal Reserve to raise rates at next week’s meeting due to “recent tensions in the financial sector.” “In light of the tension in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” the New York bank has indicated.
Source: Ambito

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