First Republic Bank’s share price cratered on Monday despite its attempts to allay investor fears after the sudden collapse of Silicon Valley Bank And Signature Bank.
Shares of First Republic, a San Francisco-based 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 more money to its reserves. The capital injection came from the Federal Reserve and JPMorgan Chase, the First Republic said.
In a statement on Sunday, CEO Mike Roffler said the bank “continues to fund loans, process transactions and respond fully to customer needs.” Seeking to reassure investors and depositors, he also said that “the company’s capital and liquidity positions are very strong and its capital remains well above the regulatory threshold for well-capitalized banks.”
First Republic has more than $70 billion in idle funds, the bank said. The company did not immediately respond to a request for comment.
Shares of other regional banks also took a hit on Monday, including Zions, Pacific West and Western Alliance. More than a dozen regional banks saw their transactions halted on Monday after prices continued to fall following the seizure by regulators of Silicon Valley Bank (SVB) and Signature Bank of New York.
Bank of America analysts said they “expect volatility in regional bank stocks to remain challenging in the near term as investors recalibrate the risk-reward ratio” in the coming days.
“The events of the past few days are likely to compound the funding cost pressure the industry was already facing,” they said in a report. “No bank is immune, but this pressure will likely be more pronounced among banks with a larger number of rate-sensitive customers.”
Regional lenders that saw share prices fall on Monday are unlikely to slump like the SVB did because “most of the larger regional banks have much more diversified deposit bases,” said Solita Marcelli, chief financial officer. investments at UBS, in a research note.
California’s Department of Financial Protection and Innovation said it took control of SVB because the bank had “insufficient liquidity and insolvency.” The bank’s closure marked the largest failure of a financial institution since Washington Mutual in 2008 at the height of the financial crisis. The SVB is now under the control of the Federal Deposit Insurance Corporation, which US Treasury Secretary Janet Yellen has ordered to guarantee depositors full access to their funds from Monday.
Withdrawing funds from SVB is one thing, but “the biggest and most disturbing story is how this will change the startup and VC community in the future,” said Wedbush analyst Dan Ives. Securities, in a report.
“We heard from nervous VCs and tech startups over the weekend who are worried about their employees, their payrolls and the uncertain financial world they face going forward after SVB,” Ives said.
A few days after the closure of SVB, New York regulators closed Signature Bank. Signature held more than $110 billion in assets before it closed. Taking over Signature “was the right move to protect consumers,” New York Governor Kathy Hochul said in a statement Monday. Tweeter.