Shares of First Republic Bank, Credit Suisse Tumble Despite Emergency Funding Pledges
Date
3/19/2023 9:20:24 AM
(MENAFN) Investors remain wary of the banking industry despite public and private measures to stabilize the sector, as evidenced by the tumbling shares of First Republic bank and Credit Suisse on Friday. First Republic Bank shares plunged 33 percent, closing at USD23.03, while Credit Suisse slipped 7 percent, ending the day at USD2.01. This decline resumed the downward slides that were interrupted on Thursday when both banks received pledges of emergency funding aimed at shoring up their beleaguered finances.
A consortium of 11 big financial institutions committed to provide USD30 billion in funding for First Republic Bank, while the Swiss central bank agreed to provide almost USD54 billion to Credit Suisse. However, these pledges did not prevent the drops in the banks' stocks on Friday, which followed a short-lived reprieve on Thursday amid deepening concerns about the industry following the sudden collapse of Silicon Valley Bank and Signature Bank.
First Republic Bank had reported $176 billion in deposits in December, but its recent borrowing from the Federal Reserve suggests that depositors may be withdrawing their money at a more rapid rate than before. Alexander Yokum of CFRA Research wrote in a note on Friday that this adds to the fear that other regional banks could see deposit outflows, although he expects these outflows to be of a far smaller magnitude.
The move by the Swiss National Bank to recapitalize Credit Suisse has also failed to allay concerns about its finances. While the capital infusion of almost USD54 billion is significant, analysts at Capital Economics say it is unlikely to fix Credit Suisse's main problem, which is that it hasn't been profitable in two years.
Overall, the tumbling shares of First Republic Bank and Credit Suisse suggest that investors remain cautious about the banking industry, despite the emergency funding pledges. The recent collapse of Silicon Valley Bank and Signature Bank has deepened concerns about the sector, and the borrowing from the Federal Reserve by First Republic Bank suggests that deposit outflows may be a growing concern. The banking industry will need to continue to work to restore investor confidence and stabilize its finances in order to bounce back from this period of uncertainty.
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