(New York) The American bank First Republic was still battered on Wall Street on Monday despite the lifelines launched by the authorities and competing establishments.
First Republic, founded in 1985, is based in San Francisco with agencies primarily located in California and urban areas on the East Coast. At the end of 2022, it was the 14th largest American bank by asset size.
According to the agency S
After the close failures of three banks in the United States, investors and analysts feared that customers would take fright and withdraw their money en masse. What First Republic implicitly confirmed on Thursday by indicating that it borrowed tens of billions from the American central bank (Fed) every day between March 10 and 15, at fairly high rates.
According to the Wall Street Journal, a total of $70 billion has been withdrawn in recent days, about 40% of what the bank was recording at the end of 2022.
“Between the deposits that the bank will probably have to remunerate more and the rising borrowing rates, its profitability will inevitably contract”, remarks Alexander Yokum of CFRA.
Faced with the plunge in the action, the bank sought to reassure by announcing on March 12 that it had, thanks to the Fed and JPMorgan Chase, 70 billion dollars in liquidity.
As the stock market crash continues, eleven major American banks pledged on Thursday to deposit a total of $30 billion in deposits in its accounts. A sign of confidence according to them since these deposits are not insured, and they can therefore lose their bet.
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First Republic assured Sunday that thanks to the 30 billion and its own reserves, it was “well placed to manage” short-term withdrawals.
But “ if you are a bank customer and you see his rating lowered twice in a few days, you don’t necessarily want to keep your money there”, says Alexander Yokum.
Despite the interventions of the authorities and the most important representatives of the banking sector, investors still caused the stock to fall on Wall Street on Monday, which has already lost 80% of its value in eight sessions.
Already significant at the opening, the share’s fall accelerated in the middle of the session: it tumbled 35% around 12:45 p.m. in the green.
According to the Wall Street Journal, big bank bosses, led by JPMorgan CEO Jamie Dimon, are looking for a way to stabilize First Republic.
One of the hypotheses considered is to convert all or part of the 30 billion deposits made Thursday into capital, which would lead to a dilution of existing shares. A sale or a fresh capital injection are also options on the table, reports the daily.
