Wall Street pummels regional banks, despite Biden’s assurances
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Wall Street |
First Republic Bank slashed shares of the bank Monday, even after an emergency regulator action on Sunday to insure all depositors at bankrupt Silicon Valley Bank and Signature Bank and provide additional funds to other struggling institutions.
San Francisco First Republic shares fell 52% Monday after falling 33% last week. PacWest Bancorp fell 24% and Western Alliance Bancorp lost more than 40% as regional bank stocks fell.
Zions Bancorporation fell 18%, while KeyCorp fell 26%. Other financials also came under pressure as Bank of America fell 4% and Charles Schwab fell 9%.
Many bank stocks have been repeatedly blocked due to intraday volatility. The declines came despite Sunday's announcement that the Federal Reserve had launched a new bank lending program with maturities, offering banks loans of up to one year in exchange for high-quality collateral such as Treasury bills.
The central bank also eased discount window conditions. The First Republic said Sunday it received additional money from the Federal Reserve and JPMorgan Chase. The bank said the move takes its idle liquidity to $70 billion, ahead of any funding it may receive from the Fed's new structure.
"First Republic's capital and liquidity positions are very strong and its capital remains well above the regulatory threshold for well-capitalized banks," said founder Jim Herbert and CEO Mike Roffler in a statement.
Herbert also told CNBC's Jim Cramer Monday that the bank was operating as usual and hadn't seen many depositors exit the store.
Western Alliance said in a statement that it had seen "moderate" outflows and was taking further steps to bolster its liquidity.
Meanwhile, the SPDR S&P Regional Banking ETF shed 10% on Monday after falling 16% last week.
Regional bank shares fell on Monday after a spate of withdrawals from SVB Financial forced the bank to close.
A key concern was SVB's high proportion of uninsured deposits, as most of the bank's clients were unsure about repayment ahead of the weekend's regulatory changes.
While SVB has had an unusually high proportion of uninsured deposits, there are other mid-sized banks that could face major setbacks.
“We believe that regions with less diversified and large uninsured deposit balances are at risk of deposit flight, but not to the same extent as SVB, and should be given time to enter wholesale funding markets (like FHLB) and increase the level of liquidity.
We believe that in the volatile environment we find ourselves in, banks need to be cautious about the potential negative signaling effect of an increase in interest rates on deposits in order to support deposits," Citi analyst Keith Horowitz said in a note to Client
SVB was the largest U.Bank S. has collapsed since 2008 with assets of $212 billion. According to the securities filing, the First Republic reported assets of approximately $213 billion as of December 31.
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