Shares of First Republic and Credit Suisse fall despite new capital

Shares of First Republic Bank and Credit Suisse fell on Friday, a sign that investors remain wary of the battered banking sector despite public and private measures aimed at stabilizing the sector.

Falling bank stocks resumed downward slides that were halted on Thursday when First Republic and Credit Received received emergency funding pledges aimed at consolidating their beleaguered finances. Shares of First Republic Bank plunged 33% on Friday, closing at $23.03, while Credit Suisse slid 7%, ending the day at $2.01.

The declines come after shares of the First Republic gained on Thursday, while shares of Credit Suisse were unchanged, reflecting a short-lived reprieve amid growing concerns about the industry after last week’s sudden collapse of Silicon Valley Bank and Signature Bank.

A consortium of 11 major financial institutions pledged on Thursday to provide $30 billion in the financing of First Republic Bank, and the Swiss central bank agreeing to provide nearly $54 billion at Credit Suisse.

The First Republic reported $176 billion in deposits in December, but its recent borrowing from the Federal Reserve could indicate depositors are withdrawing their money at a faster rate than before, an analyst said.

“In our view, this adds to concerns that other regional banks may see deposit outflows, although we expect outflows of a much smaller magnitude,” wrote analyst Alexander Yokum of CFRA Research in a note on Friday.

Meanwhile, the Swiss National Bank’s decision to recapitalize Credit Suisse has not assuaged concerns about its finances. The capital injection is unlikely to solve Credit Suisse’s main problem that it has not been profitable for two years, analysts at Capital Economics said.

Although Credit Suisse has a plan to relaunch its activities over a three-year period, “it is not certain that the markets will give it that long,” said Andrew Kenningham, chief economist for Europe on Friday. Capital Economics, in a note to investors.

Former Silicon Valley Bank parent company files for bankruptcy


San Francisco-based First Republic shares tumble after California regulators grasped Silicon Valley Bank on March 10. As with Silicon Valley Bank, a significant portion of First Republic’s deposits are uninsured, making it more prone to withdrawals from wayward customers. The bank has $212 billion in assets under management and has about 7,200 employees.

With questions swirling about the First Republic’s financial stability, its stock price has plunged, losing 81% of its value since the start of the month.

Meanwhile, Credit Suisse’s problems began long before the collapse of Silicon Valley Bank. It racked up $8 billion in net losses last year, the largest the company has ever recorded.

Credit Suisse is “a bigger threat to the global economy” in part because it has subsidiaries outside Switzerland and handles transactions for hedge funds, Kenningham said.

Shares of other regional banks, including KeyCorp, Pacific West, Western Alliance and Zions, plunged between 7% and 11% on Friday, but those banks failed to receive promises of billions of dollars in aid like Credit Suisse and First Republic.

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