First Republic stock falls 62% amid fears of regional bank contagion

·Senior Business Reporter

March 13, 2023 at 9:17 AM·3 min read

First Republic Bank (FRC) shares fell a record 62% on Monday to close at $31.21 each, despite measures by U.S. regulators to shore up confidence in the banking system following the collapse of Silicon Valley Bank.

First Republic and other regional lenders' stocks were repeatedly halted for volatility during the trading session amid fears of a bank contagion. Western Alliance's (WAL) shares fell 47%, while PacWest Bancorp (PACW) and Zions Bank Corporation (ZION) close off their session lows, down 21% and 25% respectively.

On Sunday First Republic assured it had secured additional liquidity from the Federal Reserve Bank and JPMorgan Chase.

“The total available, unused liquidity to fund operations is now more than $70 billion,” said First Republic, adding it is also eligible for the new Bank Term Funding Program announced by the Federal Reserve on Sunday.

First Republic's uninsured deposits at the end of 2022 totaled $119.5 billion, or 67% of its total deposits, according to its financial statements.

Analysts at Raymond James, Compass Point and Wolfe Research all downgraded First Republic on Monday, with others slashing their price target on the stock. However JPMorgan reiterated its Overweight rating, saying this was a buying opportunity.

First Republic's liquidity shore-up came after San Francisco-based peer Silicon Valley Bank, previously owned by SVB Financial (SIVB), was shut down by regulators last Friday as depositors flocked to get their money out of the bank. Many of Silicon Valley Bank’s clients were startups and venture capital firms, with accounts that far exceeded $250,000, the amount normally insured by the Federal Deposit Insurance Corporation, or FDCI.

On Sunday, financial regulators said depositors of SVB would be made whole, and announced new facilities to backstop deposit withdrawals across the banking system.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said the joint statement by U.S. Treasury Secretary Janet Yellen, Fed chief Jerome Powell, and FDIC Chair Martin Gruenberg.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), which was closed on Sunday by its state chartering authority.

Regional banks are under pressure despite measures by US regulators to shore up confidence in the banking sector after the collapse of Silicon Valley Bank.

The measure may not be enough to calm concerns about liquidity for all the banks, especially regional ones which do not have to undergo the same stress tests and regulations as the country's largest lenders.

“Risk and fear are still very much alive in this marketplace,” David Ellison of Hennessy Large Cap Financial told Yahoo Finance Live. “The electronic nature of the banking system now, people can move money out very rapidly.”

“This isn’t people lined outside looking to get 20 dollars out,” he said.” “This is people calling, going on the Internet, and pulling out millions of dollars very quickly. So this liquidity issue is bigger than the Fed ever expected. And I think it’s going to be a struggle going forward here to kind of establish a sense of liquidity in the system.”

CHINA - 2023/02/19: In this photo illustration, the American multinational financial services company Charles Schwab logo is seen displayed on a smartphone with an economic stock exchange index graph in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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