First Republic shares tank, SVB files for bankruptcy
STORY: One day after a $30 billion lifeline boosted its beleaguered shares, First Republic Bank saw its stock price plummet more than 25% on Friday – with trading temporarily halted – as new information about the bank’s finances reignited investors’ fears of a broader banking crisis.
First Republic’s Friday stock plunge came after the San Francisco lender said it was suspending dividend payments to its shareholders.
It also disclosed recent changes to its balance sheet – including a more than $100 billion loan from the U.S. Federal Reserve – that one analyst described to Reuters as “staggering” and “painting a very dire outlook” for the bank and its shareholders.
First Republic’s roller coaster ride began earlier in the week when investors feared it may be the next to fall after the collapse of SVB Financial and Signature Bank.
Big banks including JPMorgan Chase and Morgan Stanley stepped in with the $30 billion lifeline – in a deal that was put together by power brokers including JPMorgan CEO Jamie Dimon, Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen.
“Our banking system is sound….”
The renewed fears of a First Republic collapse came even after Yellen on Thursday assured lawmakers that the U.S. banking system was sound.
But what a difference a day makes… with other embroiled banks on Friday also making news.
SVB – whose former unit Silicon Valley Bank was taken over by U.S. regulators – said on Friday it had filed for Chapter 11 bankruptcy protection to seek buyers for its assets.
And Credit Suisse shares came under renewed pressure despite the bank having secured an emergency loan of up to $54 billion from the Swiss National Bank.
Renewed worries about the sector sank other bank stocks Friday, and helped drag down Wall Street’s main indexes.
Fed data showed that banks sought a record $152.9 billion in emergency liquidity from the Federal Reserve over recent days, surpassing the previous high that was set during the most acute phase of the 2008 financial crisis.