Shares of U.S. regional banks fell on Monday, led by sharp losses in First Republic Bank as news of fresh financing failed to quell fears of a potential bank contagion following the collapse of SVB Financial Group and Signature Bank.
San Francisco-based First Republic has been able to meet repayment demands with the help of additional funding from JPMorgan Chase & Co ( JPM.N ), the mid-cap lender’s executive chair, Jim Herbert, told CNBC.
In response to questions from Reuters, a bank spokeswoman said the bank “fully meets the needs of our clients in our offices and online ….”
Western Alliance ( WAL.N ), KeyCorp ( KEY.N ), Comerica Inc ( CMA.N ), Huntington Bankshares Inc ( HBAN.O ), and PacWest Bancorp ( PACW.O ) were among other regional losers with declines of 16. Creditors also fell. % and 29%.
There were several trading disruptions on bank shares, with the KBW Regional Banking Index (.KRX) down 5.4%, and the S&P 500 Banking Index (.SPXBK) down 6%.
“The real problem for the industry is that there is a crisis of confidence in the stickiness of deposits and when that becomes unhinged, things can move very quickly,” said Christopher McGratty, head of US bank research at investment bank KBW. are”.
US President Joe Biden has vowed to do whatever it takes to deal with a potential banking crisis. On Sunday, national regulators took emergency measures, and First Republic secured additional financing through JPMorgan and the U.S. Federal Reserve, giving it access to a total of $70 billion in funds.
Despite the cash infusion, Raymond James doubled down on the bank’s stock, highlighting the risk of deposit outflows from panicked large depositors following the bank’s run at SVB.
Founded in 1985, First Republic had $212 billion in assets and $176.4 billion in reserves at the end of last year, according to its annual report.
About 70% of its deposits are uninsured, higher than the 55% average for mid-sized banks and third in the group behind Silicon Valley Bank and Signature Bank, according to a Bank of America note.
Bank of America cut its price target on the stock to $90 from $140.
The banking rout, which follows several Fed interest rate hikes over the past year, has pushed the yield on the 2-year Treasury note to the lowest since the 2008 financial crisis.
Art Hogan, chief market strategist at B. Riley Wealth, said the market is “figuring out in real time what the risk of such a rapid rate hike could do to the balance sheets of some regional banks.”
Each regional bank has exposure to different market segments, Hogan said. He added that the fate of regional bank stocks will be “case-by-case” as investors look to see which may have more downside exposure.
Brian Levitt, global strategist at Invesco, said the market is focusing on smaller banks with specialized lending businesses. After a Silicon Valley bank, investors turn their attention to the next bank facing interest rate and specific credit risks. “First Republic Bank, which has significant exposure to coastal real estate markets, appears to be next on the list”.
Among Wall Street lenders, Bank of America Corp ( BAC.N ) fell 3.3 percent, Citigroup Inc ( C.N ) and Wells Fargo ( WFC.N ) shed about 6 percent, while lenders in Asia and Europe Also fell.
The U.S. system of Federal Home Loan Banks (FHLB), which lends to banks and other member financial institutions primarily to help consumers get mortgages, sold about $64 billion in short-term notes, Bloomberg News reported. Trying to collect dollars.