First Republic Bank's stock price plummets after Silicon Valley Bank, Signature Bank collapse
Date
3/14/2023 5:30:05 AM
(MENAFN) Investors were left shaken after Silicon Valley bank (SVB) and Signature Bank collapsed in the wake of the US economic crisis. First Republic Bank, a regional bank based in San Francisco with $213 billion in assets, suffered a significant hit in the stock market with shares falling more than 70% in early trading, despite their recent attempts to quell investor fears. Only one day after the company announced an infusion of capital from the Federal Reserve and JPMorgan Chase, First Republic Bank failed to win back investor confidence.
CEO Mike Roffler released a statement reassuring investors and depositors that the bank "continues to fund loans, process transactions and fully serve the needs of clients." He also stated that the company's "capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks." In an effort to further ease concerns, the bank revealed that it had more than USD70 billion available in unused funds. However, this was not enough to prevent the steep decline in the company's stock value.
The sudden collapse of Silicon Valley Bank and Signature Bank caused concern among investors and depositors, which has led to the halt of trading for over a dozen regional banks. The stocks of other regional banks, including Zions, Pacific West and Western Alliance, also took a hit on Monday. Analysts at Bank of America warned that "regional bank stock volatility" is likely to remain a challenge in the short run as investors re-evaluate the risk-reward in the coming days.
Although regional lenders saw falling stock prices on Monday, it is unlikely they will collapse in the way Silicon Valley Bank did. Solita Marcelli, the chief investment officer at UBS, stated in a research note that "most large and regional banks have much more diversified deposit bases." However, the funding cost pressure that the industry was already facing is expected to worsen due to the recent events. No bank is immune, but this pressure will likely be most pronounced among banks with a larger mix of rate-sensitive customers.
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