by Pete Schroeder, Tom Westbrook and Scott Murdoch
(Reuters) – First Republic Bank, victim of a crisis of confidence of investors and customers, will receive 30 billion dollars from several large American banks which try to avoid a domino effect after the bankruptcy of several banking establishments last week.
As part of an unusual bailout that multiple sources say was orchestrated earlier this week by JPMorgan Chairman and CEO Jamie Dimon, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell, 11 banks of Wall Street announced Thursday that they deposited 30 billion dollars in First Republic.
These include JPMorgan, Citigroup, Bank of America Corp, Wells Fargo, Goldman Sachs and Morgan Stanley.
The announcement allowed First Republic to close up 10% on Thursday on the New York Stock Exchange. But the stock fell 14.8% on Friday in out-of-hours trading on Wall Street as the bank declared a dividend suspension.
The bank also said it had a cash position of about $34 billion, not including the $30 billion injected, and that it had borrowed up to $109 billion from the Fed between on March 10 and 15 and an additional 10 billion from the Federal Home Loan Bank on March 9.
Investors were surprised by these late revelations and the fact that First Republic and other banks have leaned on the Fed this month for support.
According to data released by the Fed on Thursday, U.S. banks borrowed a record $152.85 billion from it in recent days, increasing the size of the central bank’s balance sheet after months of contraction.
The drop in the First Republic stock in the forecourt highlights the extent of investor nervousness, despite attempts by US and European authorities to restore confidence on a lasting basis.
Jason Ware, chief investment officer at Albion Financial Group, said the First Republic intervention was “a breath of fresh air for the system”, but probably more was needed. “It’s not important enough,” he said.
Founded in 1985 and based in San Francisco, First Republic held $212 billion in assets and $176.4 billion in deposits at the end of 2022, according to its annual report.
Its stock tumbled about 70% following the collapse of Silicon Valley Bank.
(Pete Schroeder and Chris Prentice in Washington, Nupur Anand in New York, Tom Westbrook and Rae Wee in Singapore, Scott Murdoch in Sydney, Noel Randewich in Oakland, written by Deepa Babington and Sam Holmes, Laetitia Volga, edited by Blandine Hénault )
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