SVB crisis: First Republic Bank bleeds red on stock market as aftereffects
Days after the US-based Silicon Valley Bank’s collapse, its effect continued over other financial firm in the stock market, as First Republic Bank shares fell a record 67% at the open despite a statement from the bank late Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements, including from the Federal Reserve and JPMorgan Chase & Co.
After the decline in trade, the trading was halted. “The additional borrowing capacity from the Federal Reserve, continued access to funding through the Federal Home Loan Bank, and ability to access additional financing through JPMorgan Chase & Co. increases, diversifies, and further strengthens First Republic’s existing liquidity profile,” Bloomberg quoted the First Republic Bank as saying said.
However, the assurances failed to win over investors. Also, European bank stocks slumped despite analysts including at Deutsche Bank AG and Citigroup Inc said the SVB crisis had little bearing on the outlook for lenders in the region.
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According to the First Republic statement, more liquidity is available through the Fed’s new lending facility. The announcement came following the bank’s liquidity came under pressure along with other regional banks after SVB Financial Group’s banking unit collapsed into receivership on Friday.
Meanwhile, Germany’s financial regulator BaFin announced Monday that it had frozen SVB’s branch in the country. With this, SVB’s Germany Branch will not be allowed to sell assets or make payments as it’s at risk of not being able to fulfill commitments to creditors, BaFin said in a statement.
BaFin added that the German operations aren’t considered to be systemically relevant. According to the regulator, the Frankfurt-based institution’s balance sheet amounted to €789.2 million ($842.3 million) at the end of last year and doesn’t take deposits.
Apart from these, Credit Suisse Group AG’s shares too tumbled 15% on Monday morning, however, there was no evidence of a clear link to the SVB crisis.
Potential SVB buyers:
Earlier on Friday, SVB’s financial health declined after the bank announced plans to raise up to $1.75 billion aiming to strengthen its capital position. As per details, the start-up lender is the largest bank to fail since the 2008 financial crisis.
To get the lender out of financial crisis, the Federal Deposit Insurance Corporation (FDIC) has been appointed receiver and was trying to find another bank over the weekend which was willing to merge with Silicon Valley Bank.
Among the list of potential buyers, California based lender Santa Clara – with $209 billion in assets – may pull off a deal over a weekend relatively short, added the Reuters report.
While, probable list of buyers for the bank include Signature Bank, First Republic Bank, PacWest Bank, Charles Schwab and Western Alliance Bank. However, nothing has been confirmed as of yet.
With agency inputs.
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