First Republic: shares sink despite US$30bn injection – 03/17/2023 – Market

First Republic Bank shares were down more than 26% on Friday as the $30 billion (R$158 billion) in deposits injected by major US banks failed to assuage investor fears about the institution.

Fears of an imminent bank collapse led to an unprecedented deal struck by powerful players including US Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and JPMorgan Chief Executive Jamie Dimon. , On thursday.

The First Republic suspended its dividends and disclosed that it has US$ 34 billion (R$ 179 billion) in cash, excluding the new injection of deposits.

The bank also disclosed that it had borrowed up to $109 billion (R$574.1 billion) from the Fed and another $10 billion (R$52.6 billion) from the Federal Home Loan Bank on March 9.

“The magnitude of changes to the (bank’s) balance sheet in just one week is staggering… and together with the suspension of the dividend, it indicates a very dire outlook for the company and shareholders,” said KBW managing director, Chris McGratty.

Shares in Wall Street banks including JPMorgan, Citigroup Inc, Bank of America and Wells Fargo involved in the First Republic bailout also fell by between 2% and 3%.

Founded in 1985, First Republic had US$212 billion (R$1.1 trillion) in assets and US$176.4 billion (R$929 billion) in deposits at the end of last year, according to its annual balance sheet.

The bank has been plagued by fears about the financial health of the US banking sector triggered by the collapse of two mid-sized US banks last week. First Republic shares are down around 80% this month.

“Possibly the market is looking for a full sale/buyer rather than a capital injection,” said John Petrides, manager at Tocqueville Asset Management, adding that the crisis is not over yet.

Fed data released on Thursday showed banks sought a record $152.9 billion in emergency liquidity from the U.S. central bank in recent days, surpassing the previous record set during the most acute of the 2008 international financial crisis.