First Republic Bank was losing value again on Friday, even after a group of big banks said they would provide $30 billion in deposits in a show of confidence.
First Republic’s stock plunged by more than 20% after opening on Friday, showing that the crisis in the banking sector isn’t yet over. The San Francisco-based bank is down nearly 80% from a month ago.
SVB COLLAPSE: SVB FINANCIAL GROUP FILES FOR CHAPTER 11 BANKRUPTCY
Following Silicon Valley Bank’s collapse, banks that have a high number of uninsured deposits have encountered increased scrutiny. First Republic had the third-highest rate of uninsured deposits, following SVB and Signature Bank. The declines come even after the country’s biggest banks deposited $30 million into First Republic to stabilize the firm.
JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Morgan Stanley, and Goldman Sachs all pitched into the effort. The move was done to inspire confidence in the U.S. banking system and the markets more broadly.
First Republic released the first statement on its website in days emphasizing that the move by the big banks reflects institutional confidence in the bank’s ability to stay above water.
“Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system,” said bank founder Jim Herbert and CEO Mike Roffler.
Still, despite the infusion, there has been ongoing doubt about First Republic and other regional banks, whose stocks have also declined since SVB’s sudden collapse a week ago.
“The significance of the changes in FRC's balance sheet in just one week are staggering, in our view, and along with the suspension of the common stock dividend, paints a very dire outlook for the company and shareholders, in our view,” said KBW, according to research cited by the Wall Street Journal.
PacWest Bancorp was down more than 13% on Friday, KeyCorp fell 8%, and Zions Bancorp was down nearly 7%.
But First Republic isn’t the only bank that investors are keeping an eye on. Swiss megabank Credit Suisse is struggling to inspire confidence in its stability.
Credit Suisse declined by 10% on Friday even after the Swiss central bank stepped in. The Swiss National Bank agreed to loan Credit Suisse up to more than $50 billion to shore up confidence in the megabank. The bank has been a bit of a see-saw, with Credit Suisse up over 30% at one point on Thursday.
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders. … My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs,” said Credit Suisse CEO Ulrich Koerner, who also thanked the Swiss central bank for acting.
The news comes exactly a week after the government announced that SVB had failed. The parent company of SVB officially filed for bankruptcy in New York on Friday in a move that had been largely expected.
“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” said William Kosturos, chief restructuring officer for SVB Financial Group, in a statement.
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While the banking sector got roiled this week, gold and cryptocurrencies performed well.
Gold prices were up 2% on Friday, with bullion rising about 5.3% for the entire week. Bitcoin, which has seemed to move inverse to the banking sector, was up more than 6% on Friday, punching in above $26,000. The flagship cryptocurrency is up about 20% from Monday, and even more from right before SVB collapsed.