Breaking News
Investing Pro 0
⏰ React to the Market Faster with Custom, Real-Time News Get Started

Major US banks inject $30 billion to rescue First Republic Bank

Economy Mar 16, 2023 07:17PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. The Credit Suisse logo adorns a sign at the entrance to their campus in Research Triangle Park in Morrisville, North Carolina, U.S., March 15, 2023. REUTERS/Jonathan Drake 2/2
 
US500
+0.30%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
C
-0.59%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BAC
-2.42%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GS
+0.38%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JPM
-0.27%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ALVG
-0.62%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Pete Schroeder, Chris Prentice and Nupur Anand

(Reuters) - Large U.S. banks injected $30 billion in deposits into First Republic Bank (NYSE:FRC) on Thursday, swooping in to rescue the lender caught up in a widening crisis triggered by the collapse of two other mid-size U.S. lenders over the past week.

Banking stocks globally have been battered since Silicon Valley Bank collapsed last week due to bond-related losses that piled up when interest rates surged last year, raising questions about what else might be lurking in the wider banking system.

Within days, the market turmoil had ensnared Swiss lender Credit Suisse, forcing it to borrow up to $54 billion from Switzerland's central bank to shore up liquidity.

By Thursday afternoon, the spotlight whipsawed back to the United States as big banks led an effort to prop up support for First Republic, a regional lender whose shares had tumbled 70% in the last nine trading sessions.

GRAPHIC - First Republic Bank's stock market collapse

https://fingfx.thomsonreuters.com/gfx/mkt/lgpdkjkggvo/Pasted%20image%201678991547543.png

Some of the biggest U.S. banking names including JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), Wells Fargo (NYSE:WFC) & Co, Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) were involved in the rescue, according to a statement from the banks.

The deal was put together by power brokers including U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and JPMorgan Chase CEO Jamie Dimon, who discussed the package on Tuesday, according to a source familiar with the situation.

U.S. regulators said the show of support was most welcome, and showed the resilience of the banking system.

A round of financing on Sunday raised through JPMorgan had given First Republic access to $70 billion in funds. But that failed to calm investors as worries of a contagion deepened with the demise of Signature Bank (NASDAQ:SBNY) to follow that of SVB and depositors began moving cash to larger lenders.

First Republic Bank's stock closed up 10% on news of the rescue but its shares fell 18% in after-market trading, after the bank said it would suspend its dividend.

The bank's stock price is down more than 70% since March 6.

News of the rescue also helped boost Wall Street indexes, with JP Morgan, Morgan Stanley and Bank of America all up more than 1%, while the benchmark S&P 500 Banks Index recovered 2.2%.    Smaller banks also rebounded from the recent sell-off, with Fifth Third Bancorp (NASDAQ:FITB), PNC Financial Services Group (NYSE:PNC) and KeyCorp (NYSE:KEY) each gaining more than 4%.

EMERGENCY LIQUIDITY

Earlier in the day, Credit Suisse became the first major global bank to take up an emergency lifeline since the 2008 financial crisis as fears of contagion swept the banking sector and raised doubts over whether central banks will be able to sustain aggressive interest rate hikes to rein in inflation.

Rapidly rising interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders already worried about a recession.

However, the European Central Bank raised interest rates by 50 basis points on Thursday as flagged, stressing the resilience of the euro area banking sector while assuring it had plenty of tools to offer liquidity support if needed.

The U.S. Federal Reserve is expected to follow the ECB move at its next meeting with a quarter-point interest-rate hike that just days ago looked derailed by turmoil in the banking sector.

Policymakers have tried emphasize that the current turmoil is different than the global financial crisis 15 years ago as banks are better capitalised and funds more easily available.

But central bank data on Thursday also showed that banks sought record amounts of emergency liquidity from the Federal Reserve in recent days, driving up the size of the Fed's balance sheet after months of contraction.

"The numbers, as we see them right here, are more consistent with the idea that this is just an idiosyncratic issue at a handful of banks," said Thomas Simons, money market economist with investment bank Jefferies.

Yellen said the U.S. banking system remains sound thanks to "decisive and forceful" actions following the collapse of Silicon Valley Bank.

Allianz (ETR:ALVG), one of Europe's biggest financial firms, said authorities were "well equipped" to deal with any liquidity crisis, "unlike what happened during" the 2007-2008 financial crisis.

BUYING TIME

Credit Suisse, a bank with a 167-year history, became the biggest European name swept up in the turmoil after its largest investor said it could not provide more funds due to regulatory constraints.

It said it would exercise an option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank, which confirmed it would provide liquidity to the bank against sufficient collateral.

Credit Suisse shares closed 19% higher on Thursday, recovering some of their 25% fall on Wednesday. Since March 8, before last week's collapse of SVB, European banks have lost around $165 billion in market value, Refinitiv data shows.

The stock market value of Switzerland's second-largest bank has fallen by 90% since its peak in February 2007 of around $91 billion, to around $8.66 billion following a prolonged slide in its shares.

Analysts said the measures will buy time for Credit Suisse to carry out a planned restructuring and possibly take further steps to pare back the Swiss lender.

GRAPHIC - Credit Suisse goes off piste

https://www.reuters.com/graphics/CREDITSUISSEGP-STOCKS/akveqegdgvr/chart.png

Major US banks inject $30 billion to rescue First Republic Bank
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Bill Riley
Bill Riley Mar 16, 2023 11:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
credit unions are better than banks
peter neal
peter neal Mar 16, 2023 8:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is all going to come completely apart more than anyone can imagine. Same as the Great Depression.
Jimmy Tsang
Jimmy Tsang Mar 16, 2023 8:07PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Those “major banks” inject the money which earned from betting CDS on the same exact bank haha
Dead Cat Bounce
DeadCatBounce1 Mar 16, 2023 8:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Pump and Short !
Ying Yu
Ying Yu Mar 16, 2023 5:41PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Money from the new clients of BAC are from FRB. The money savers lost their interest in FRB. Now, their money go back to FRB again
Casador Del Oso
Casador Del Oso Mar 16, 2023 3:13PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Contagion contained. Now FED can get back to fighting inflation with higher rates for longer.
James King
James King Mar 16, 2023 1:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why clients still willing to leave money in CS if they can move it to much safer banks like C, BAC. Soon CS will need more and much larger lifeline until both banks bankrupted.
Derick Lim
Derick Lim Mar 16, 2023 5:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With the 54 billion lifeline Credit Suisse can now demand payments from default clients to pay their executives with big fat salary.....and push the stocks up.......
Stan Smith
Stan Smith Mar 15, 2023 9:37PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
and.. stocks up..Gold down. Go figure!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email