Shares of First Republic Bank fell sharply in early trading this morning, forcing the company to halt trading amid turmoil. That means investors are worried about the financial institution, despite government measures over the weekend to deal with Silicon Valley’s banking crisis and possible spillover effects.
The volatility comes days after a stock market selloff heralded SVB’s failure as analysts and the broader tech community remain concerned about contagion.
Shares of First Republic are now down more than 65% and trading was suspended as previously reported. To allay investor concerns, First Republic said over the weekend that it had strengthened its financial position with “additional liquidity” raised by the Federal Reserve and JPMorgan.
It has “more than $70 billion” of unused cash “to fund operations,” according to the company’s March 12 announcement. Presumably this is capital against the sale of the company and possible loss of investor confidence.
The question for all the startups and small businesses that have lost faith in the stability of financial institutions over the past week is simple: Where is the safe place to put your money? First Republic Bank is one option after the collapse of SVB, which claims to account for half of all venture-backed startups in the U.S. by 2022.
On the one hand, falling share prices can be seen as a worrying signal; on the other hand, other regional banks, including Western Alliance and PacWest, appear to see the deal as an uncertainty and are tied to the business.
The move came despite the FDIC, the Treasury Department and the Federal Reserve announcing on Sunday that the Silicon Valley bank’s depositors would be liquidated entirely.
Their actions averted a potential crisis in which thousands of businesses could not pay salaries or operate as normal. But despite the Fed also announcing a plan through a “new non-bank financing program [that will offer] loans of up to one year,” it appears that many public market investors are still looking to pull money out of smaller banks.
A sharp drop in First Republic Bank ( FRC.N ) weighed on shares of U.S. Regional Bank ( SBNY.O ).
San Francisco-based First Republic has been able to meet withdrawal requests with additional funding from JPMorgan Chase & Co ( JPM.N ), Chief Executive Jim Herbert told CNBC. His guarantees did nothing to support the stock. Trading was halted several times as the stock fell, before falling 67 percent to $28.05. Shares of First Republic Bank fell on Monday, even as it tried to calm investor concerns after the sudden collapses of Silicon Valley Bank and Signature Bank.
Shares of First Republic, a San Francisco regional bank with $213 billion in assets and 7,200 employees, fell more than 70% in early trading just a day after the company said it had added cash to its reserves. First Republic said the injections came from the Federal Reserve and JPMorgan.
In a statement Sunday, CEO Mike Roeffler said the bank “continues to fund loans, process transactions and adequately meet customer needs.” To reassure investors and depositors, he also said the company’s “capital and liquidity position is very strong and its capital remains well above the regulatory threshold for a well-capitalized bank”.