First Republic shares fall despite unprecedented Wall Street rescue deal
Send a link to a friend
[March 17, 2023] By
Lananh Nguyen, Pete Schroeder, Andrea Shalal and Megan Davies
(Reuters) - First Republic Bank's shares fell 17% in extended trading on
Thursday, despite an unprecedented show of support in the bank from
nearly a dozen of the world's largest financial institutions.
In an unusual rescue that several sources said was orchestrated by
JPMorgan Chase & Co Chief Executive Jamie Dimon earlier this week along
with Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome
Powell, 11 Wall Street firms said they were depositing $30 billion into
First Republic.
Investors' relief, however, was short-lived. The bank's shares, which
had closed 10% higher after a volatile day that saw trading halted 17
times, slumped in after-market trading. Volume hit 15.6 million shares
in the post-market session.
The reversal came after First Republic said in a filing that it was
suspending its dividend. It also said it had a cash position of about
$34 billion, excluding the $30 billion in new deposits.
The company also said it had borrowed up to $109 billion from the Fed
between March 10 and March 15, and an additional $10 billion from the
Federal Home Loan Bank on March 9.
![](http://archives.lincolndailynews.com/2017/Jul/22/images/ads/current/rohlfs_lda_072017.png)
The reversal in First Republic's shares after the rescue deal from the
biggest U.S. banks underscores the extent of jitters in global markets,
set in motion when two regional banks failed. Separate attempts earlier
this week by U.S. and European regulators to calm investors through
emergency measures to shore up confidence in the banking sector have not
stuck.
Jason Ware, chief investment officer for Albion Financial Group, said
the Dimon-led banking sector intervention on Thursday was a "shot in the
arm for the system" but likely more was needed. "It's not big enough,"
Ware said.
Ware added that it also crystallized in investors' minds that there were
deeper problems at First Republic.
RESCUE PACKAGE
Founded in 1985, First Republic had $212 billion in assets and $176.4
billion in deposits as of the end of last year, according to its annual
report.
About 70% of its deposits are uninsured, above the median of 55% for
medium-sized banks and the third highest in the group after Silicon
Valley Bank and Signature Bank, according to a Bank of America note.
![](http://archives.lincolndailynews.com/2023/Mar/17/images/ads/current/merealty_sda_BASKETBALL_2022.png)
[to top of second column] |
![](../images/031723PIX/busine20.jpg)
A First Republic Bank branch is pictured
in Midtown Manhattan in New York City, New York, U.S., March 13,
2023. REUTERS/Mike Segar
![](http://archives.lincolndailynews.com/2023/Mar/17/images/ads/current/llm_lda_ANIMAL_2023.png)
The bank's shares have been hit hard in recent days in the aftermath
of the collapse of Silicon Valley Bank.
As the situation got worse, Dimon discussed the idea of a rescue
package with Yellen and Powell earlier this week, two sources
familiar with the matter said.
Citigroup Inc's CEO Jane Fraser also reached out to large banks to
recruit them to join the rescue effort, two other sources familiar
with the matter said.
A central player in the deal was Rodgin Cohen, a veteran lawyer at
Sullivan & Cromwell, two of the sources familiar with the matter
said. Sullivan & Cromwell did not immediately respond to a request
for comment.
The rescue saw large lenders such as JPMorgan, Bank of America Corp
Citigroup and Wells Fargo & Co make uninsured deposits of $5 billion
each into First Republic.
Goldman Sachs Group Inc, Morgan Stanley also agreed to pump in $2.5
billion each. Other lenders including BNY Mellon, PNC Financial
Services Group, State Street Corp, Truist Financial Corp and U.S.
Bancorp channeled $1 billion of deposits into the San
Francisco-based lender.
The banks will keep the funds at First Republic for an initial term
of at least 120 days.
"America benefits from a healthy and functioning financial system,
and banks of all sizes are critical to our economy," Citigroup said
in a statement, underscoring the importance of mid-size and
community banks.
"This show of support by a group of large banks is most welcome, and
demonstrates the resilience of the banking system," regulators said
in a joint statement soon after the announcement.
![](http://archives.lincolndailynews.com/2023/Mar/17/images/ads/current/firststatemortgage_sda_020223.png)
Powell said the Fed was always ready to provide liquidity through
its discount window.
(Reporting by Shreyashi Sanyal, Lisa Pauline Mattackal, Niket
Nishant and Mehnaz Yasmin in Bengaluru, and Chris Prentice, Nupur
Anand and Lananh Nguyen, Megan Davies and David French in New York,
and Pete Schroeder and Andrea Shalal in Washington; Editing by Anil
D'Silva, Shounak Dasgupta, Anna Driver, Lincoln Feast and Kim
Coghill)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |