Shares of the US regional lender fell 67% to $27.08 before trading ended on volatility.
First Republic secured additional funding through JPMorgan Chase & Co. and the Federal Reserve on Sunday, giving it access to a total of $70 billion in funding from various sources.
The liquidity of the bank is confirmed overnight, “but the real problem of the sector is that there is a crisis of confidence in the adhesion of depositors and when that is twisted, things can move very quickly”, said Christopher.
Although the injection of liquid Raymond James divided the shares of the bank into two “neutral” brands, highlighting the emerging risk First Republic faces from large depositors who follow the bank run in SVB.
Although the bank is a more suitable site for potential deposit outflows than it would have been before the increase in funding, if there are net deposit outflows, it will reduce the Commonwealth’s earning power for the first time, Raymond Analyst David Long wrote in a note.
US authorities launched emergency measures on Sunday to safeguard confidence in the banking system after the failure of Silicon Valley Bank threatened to trigger a wider financial crisis. State regulators also closed the Signature Bank of New York and secured deposits in both institutions.
“The market seems to think there’s going to be more competition. The question is when is it going to fill itself,” McGratty said.
Traders and analysts have pointed out that people’s panic could drive money from smaller banks to the perceived safety of big banks.
The collapse of Silicon Valley and the Fed’s first reaction
Federal authorities closed Silicon Valley Bank last Friday and seized deposits in the largest bank failure in the United States since the 2008 financial crisis. This collapse, according to some experts, is also the second largest bank failure in history.
After this, many analysts predict that the Federal Reserve (Fed) will give a decline in monetary policy. Goldman Sachs said it sees no reason for the Federal Reserve to raise rates at its meeting next week due to recent tensions in the financial sector. “In light of the tensions in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” the New York bank said.