First Republic Bank woes mount despite Wall Street rescue
Shares of First Republic Bank continued their free-fall despite a rare move by the biggest U.S. banks to pump $30 billion into the regional lender.
The company's stock plunged more than 47% on Monday, while trading was halted numerous times because of volatility. The shares, which have dropped around 88% in the past two weeks, closed at $12.18 after hitting an all-time low of $11.52 last week.
The sudden collapse of Silicon Valley Bank (SVB) on March 10, along with New York's Signature Bank two days later, has shaken investor confidence in regional lenders like $213 billion First Republic. In particular, concern has focused on such lenders' uninsured deposits, or account funds exceeding the Federal Deposit Insurance Corp.'s $250,000 cap.
As those concerns deepened, First Republic Bank received a $30 billion rescue package from 11 of the biggest U.S. banks last week in an effort to prevent its collapse. Over the weekend, the bank's credit rating was downgraded by S&P Global Ratings, which said the rescue package should ease near-term liquidity pressures, but "may not solve the substantial business, liquidity, funding and profitability challenges" that it believes the San Francisco-based bank is now likely facing.
In other banking news, the bidding process for the successor of Silicon Valley Bank is being extended by the FDIC to give more time to work out a potential deal.
The FDIC said Monday that there's been "substantial interest" from multiple parties for Silicon Valley Bridge Bank. The agency said it's going to allow parties to submit separate bids for Silicon Valley Bridge Bank and its subsidiary Silicon Valley Private Bank in order to simplify the bidding process and expand the pool of possible bidders.
Qualified insured banks and qualified insured banks working with non-bank partners will be able to submit whole-bank bids or bids on the deposits or assets of the institutions. Bank and non-bank financial firms will be allowed to bid on asset portfolios.
Bids for Silicon Valley Bridge Bank must be submitted by by 8 p.m. ET on Friday, while bids for Silicon Valley Private Bank are due by 8:00 p.m. ET on Wednesday.
On Friday the parent of Silicon Valley Bank filed for Chapter 11 bankruptcy protection, and Silicon Valley Bridge Bank was not included in the Chapter 11 filing.
SVB Financial Group is no longer affiliated with Silicon Valley Bank after its seizure by the FDIC. Its collapse was the second biggest bank failure in U.S. history after the demise of Washington Mutual in 2008.
The shuttering of Silicon Valley Bank and of New York-based Signature Bank has revived bad memories of the financial crisis that plunged the United States into the Great Recession of 2007-2009.
The federal government, determined to restore public confidence in the banking system, moved to protect all the banks' deposits, even those that exceeded the FDIC's $250,000 limit per individual account.
The turmoil in the banking industry spread to Europe and forced a deal under which UBS will acquire troubled rival Credit Suisse for almost $3.25 billion. The deal was orchestrated by Swiss regulators. Shares of UBS rose 4.4%.
The FDIC said late Sunday that New York Community Bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal.
Shares of New York Community Bancorp jumped 33%.
Despite all of the concerns swirling around the banking sector, Wall Street is rising on Monday following all of the moves being made to restore confidence in the banking sector.