Eleven banks are depositing a total of $30 billion to First Republic Bank in an attempt to not just lift the struggling bank out of a tailspin but also to boost confidence in the U.S. banking system.
Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo announced they are each depositing $5 billion into the struggling bank. Meanwhile, Goldman Sachs and Morgan Stanley are each depositing $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist, and U.S. Bank are each depositing $1 billion. All of these new deposits from the banks are uninsured.
“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” said a joint statement issued by the banks.
Following the collapse and receiverships of Silicon Valley Bank and Signature Bank, many small regional banks saw outflows. It also looked as though First Republic may be the next to get hit as its stock price was pummeled. First Republic’s stock, which was trading at $115 per share on March 8, at one point fell to below $20 during trading on Thursday. The stock was repeatedly halted during the session. It was trading at around $28.53 per share during Friday morning trading.
The failure of these banks also led to many small regional banks seeing outflows, as investors got spooked by the prospect of contagion within the banking system. This private bailout is an attempt to add liquidity and curb redemptions.
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the statement added. “America’s larger banks stand united with all banks to support our economy and all of those around us.”
In a statement issued by First Republic Bank, executive chairman Jim Herbert and CEO Mike Roffler shared their “deep appreciation” for the banks’ “collective support.”
Uncertainty Remains
While some Wall Street analysts say that this $30 billion lifeline to First Republic should curb future bank withdrawals and increase confidence in the sector, investors remained uneasy on Friday, with the three major markets dropping during morning trading and First Republic’s stock falling 20% despite gaining nearly 10% in the previous session.
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