US investors flee First Republic Bank. The titles of the US private bank fall more than 75 percent at the top. After the “bank run” at the collapsed Silicon Valley Bank (SVB) by panicked major investors, stockbrokers also feared a withdrawal of deposits from the regional lender. Even the securing of new funds could not reassure investors.
First Republic secured additional funding from JP Morgan and the US Federal Reserve on Sunday. This gave the money house access to a total of $70 billion in funds from various sources. Despite the cash injection, analysts at Raymond James downgraded the bank’s stock by two notches to “market perform” and pointed to the risk of deposit outflows threatening First Republic.
While the bank is better prepared for possible outflows than it was before the additional funding, if there are net deposit outflows, it will hurt First Republic’s profitability, said Raymond James analyst David Long. At the same time, traders and analysts pointed out that panicked investors could switch funds from smaller lenders to the big banks considered safer.
Other regional lenders plummeted and were temporarily suspended from trading. Western Alliance shares fell nearly 85 percent at one point and PacWest Bancorp fell as much as 59.5 percent before trading halted due to volatility. The KBW regional bank index fell 11.8 percent at its peak, falling more than the S&P 500 bank index, which fell about 8 percent.
Because of the turmoil in the financial markets, US President Joe Biden called on Congress and regulators to tighten regulation for financial institutions so that such failures do not happen again. Addressing investors, he said, “Americans can have confidence that the banking system is safe. Your money will be there when you need it.” Wall Street was not impressed at all, and bank prices continued to slide. Financial stocks also fell in Europe.
However, the situation is not comparable to the global financial crisis of 2008, said government spokesman Steffen Hebestreit. Before their consultations in Brussels, the finance ministers of the euro zone also tried to calm the nervous capital markets. “Calm down,” said France’s Finance Minister Bruno Le Maire when asked about his message to investors. EU Economic Commissioner Paolo Gentiloni said he saw no “real risk of contagion” for Europe. Of course, the situation must continue to be monitored.