First Republic Shares Fall On Fresh Liquidity Fears As Peers Rebound
Shares of First Republic Bank slumped 13.1% on Monday, after a report the regional bank could raise more money fanned worries about its liquidity despite a $30 billion rescue last week.
S&P Global downgraded the bank deeper into junk status on Sunday and said the recent cash infusion from 11 large U.S. banks may not solve its liquidity problems.
Shares of some of the big banks involved in the unprecedented support rose, reversing premarket losses. JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp were up between 1% and 2.5%.
Global bank stocks and bonds also came under pressure after UBS Group sealed a state-backed takeover of troubled peer Credit Suisse Group AG. The deal involved a hit to some Credit Suisse bondholders.
"Even though First Republic Bank says that they have the financial backing to survive, investors are concerned that they too will have to be taken over," said Jason Pride, chief investment officer of private wealth at Glenmede.
San Francisco-based First Republic is in talks to raise capital from other banks or private equity firms by issuing new shares and could also negotiate a deal to be sold, the New York Times reported late on Friday.
On Sunday, Reuters reported that the lender was still trying to put together a capital raise but that no deal was imminent.
First Republic's shares have lost 80% of their value over the past seven sessions on fears of a bank run as a large proportion of the lender's deposits are uninsured.
Other regional lenders largely rebounded after last week's sharp falls. The S&P 1500 regional banks index added nearly 4%, outperforming S&P 500 banks' 2.6% rise.
PacWest Bankcorp climbed 21.2% after the bank said deposit outflows had stabilized and its available cash of more than $10.8 billion exceeded total uninsured deposits.
"We have increased confidence that PACW can make it through this liquidity crunch now that it has enough cash to cover any additional run-off in uninsured deposits," Matthew Clark, managing director at Piper Sandler & Co said in a note.
A U.S. official told Reuters on Sunday that the deposit outflows that left many regional banks reeling in the wake of Silicon Valley Bank's failure had slowed and in some cases reversed.
New York Community Bancorp Inc added 36% as its unit entered into an agreement with U.S. regulators to buy deposits and loans from the shuttered New York-based Signature Bank.
Western Alliance Bancorp gained 3.7% , while Truist Financial Corp, KeyCorp and U.S. Bancorp added between 1.1% and 5%.
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