First Republic Bank Down 25%+ After Hours Despite $30B Bailout
After a pre-market collapse, and multiple trade halts due to volatility, the shares of the First Republic Bank managed to close 10% in the green at $34.27. The recovery, in large part fueled by a $30 billion rescue injection provided by multiple major American banks, remained fraught as the stock continued a volatile trajectory and even decline around 25% soon after the market’s close.
US Banking Situation Remains Fraught Despite Major Companies, FED Providing Relief
After giving investors a serious fright at the opening, and seeing multiple halts throughout Thursday’s trading, the First Republic Bank managed to end the day significantly in the green. The company’s shares rose around 10% on March 16th in large part due to a rescue deposit worth $30 billion that was provided by an alliance of major US banks composed of JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Truist. The recovery, however, remains uncertain as price volatility remained and the First Republic reentered a decline in after-hours trading and dropped 26% following the market’s close.
The first half of March witnessed a major crisis of confidence in the sector as three large American banks—Silvergate, Silicon Valley, and Signature Bank—were closed, either voluntarily, or through regulatory action, in the span of just five days. As a result, the FED initiated a crisis lending program and, according to a recent report, banks borrowed $11.9 billion from it since it was rolled out on Sunday,
Recent events also sparked renewed speculation on whether the next FOMC meeting will bring another interest rate hike. While analysts have previously expressed their expectations that the FED will stay the course and continue increasing, some have recently started considering a pause due to the banking turmoil, and Nomura even change its forecast into an expectation of an interest rate decrease.
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Credit Suisse Hit With a Lawsuit, While Situation in EU is Also Stabilizing
The crisis initiated by the downfall of three US banks also reverberated across the Atlantic. On the other side of the ocean, the stocks of multiple European banks saw a significant decline, but perhaps the strongest crisis developed around the Swiss giant Credit Suisse after a “material weakness” was discovered in its reporting.
On March 15th, one of the company’s largest partners, the Saudi National Bank, stated it would stop providing financial support to the embattled lender causing its shares to drop 28%. Later on the same day, the situation somewhat stabilized after the Swiss national bank agreed to support Credit Suisse with more than $50 billion. The news caused the lender’s stock price to quickly surge almost 20% and the shares have since maintained relative stability.
The turmoil, however, also led to the first investor lawsuit against Credit Suisse. This Thursday, it was revealed that a group of US investors filed a complaint alleging that the Swiss lender made “materially false and misleading statements” and overstated its financial prospects.
The noted winners, at least for the time being, of the developing banking crisis, have been cryptocurrencies, as well as various companies operating within the industry. Bitcoin in particular saw an impressive surge in value and rose by 20% up to about $25,000 after sharply declining in the immediate aftermath of Silvergate’s liquidation.
Do you think the US banking crisis will be resolved quickly, or is this just the beginning? Let us know in the comments below.