First Republic drops 50%, leads decline in bank stocks despite government's backstop of SVB

[iemanja]

Source: CNBC

Shares of First Republic Bank fell sharply in early trading this morning, which caused trades of the company to be paused due to volatility, implying investor discomfort with the financial institution despite government activity over the weekend to sort the Silicon Valley Bank crisis and potential cascading effects. The volatility comes just days after a stock market selloff that previewed SVB’s failure, as concern of contagion remains among analysts and the tech community more broadly.

As of the time of writing, equity shares of First Republic are off more than 65%, and trading has been halted as mentioned.

In an attempt to get ahead of investor concern, over the weekend First Republic announced that it had raised its financial position through “additional liquidity” raised from the Federal Reserve and JPMorgan Chase. Per the company’s statement on March 12th, it had “more than $70 billion” in unutilized liquidity “to fund operations.” Presumably that’s the capital standing against the company’s selloff, and a potential loss of investor confidence.

The question ahead of every startup and small business that lost faith in the stability of financial institutions over the past week is straightforward: where’s a safe place to park my money? First Republic Bank is one of those options since the death of SVB, which claimed in 2022 that it banked half of all US venture-backed startups. One on end, the stock drops might be seen as a concerning signal; on the other end, other regional banks also appear to be taking a trading hit – including Western Alliance and PacWest – as uncertainty links business actions for the foreseeable future.

Read more: https://www.cnbc.com/2023/03/13/first-republic-drops-bank-stocks-decline.html

[kimbutgar]

1. I got some of my IRA money in that bank and got an email from them saying they have liquidity.

To Our Valued Clients,

In light of recent industry events, the last few days have caused uncertainty in the financial markets. We want to take a moment to reinforce the safety and stability of First Republic, reflected in the continued strength of our capital, liquidity and operations.

Our capital remains strong. Our capital levels are significantly higher than the regulatory requirements for being considered well capitalized.
Our liquidity remains strong. In addition to our well-diversified deposit base, we continue to have access to over $60 billion of available, unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank.
We are here to fully serve you. We stand ready to process transactions and wires, fund loans, answer questions and serve your overall financial needs — as we do every day.
For almost 40 years, we have operated a simple, straightforward business model centered on taking extraordinary care of our clients. We have successfully navigated various macroeconomic and interest rate environments, and today we have among the industry’s highest rates of client satisfaction and retention.

We are here to help you accomplish your financial objectives and provide you with extraordinary service at all times. Please feel free to reach out to your First Republic banker or wealth manager if we may be of service.

It’s a privilege to serve you,

[FBaggins]

2. Probably because the government DIDN'T "backstop SVB"

They arguably backstopped their depositors, but not the bank.

So - if there are other banks with similar problems (poor A/L management), their stocks are at risk even if their customers aren't likely to lose any deposits.

[Igel]

4. No, the backstop is nearly universal.

Minus the first 2-3 banks.

The backstop is silent; with SVB's announced run, no political exit was easily possible. For the rest, a 1-year loan is on tap to ensure liquidity, but, as 13 years ago in that bailout, no taxpayer dollars will be expended.

Now, as then, they're merely loaned as necessary, to be repaid.

[paleotn]

3. Wall Street over reaction.

As predictable as the sun rise.