JPMorgan, Bank of America, Citigroup, and Wells Fargo assemble an Avengers-style banking alliance to save First Republic
In an epic display of financial unity, 11 powerhouse banks, led by the Fantastic Four – JPMorgan, Bank of America, Citigroup, and Wells Fargo – are swooping in to deposit a whopping $30 billion into the beleaguered First Republic Bank.
Joining the rescue squad: Morgan Stanley, Goldman Sachs, BNY Mellon, PNC Bank, State Street, Truist, and US Bank
Each member of this money-saving Justice League has pledged their support: the Fantastic Four will each contribute $5 billion, Goldman Sachs and Morgan Stanley will add $2.5 billion each, and the remaining banks will toss in a cool billion apiece. Thursday afternoon’s press release unveiled the daring rescue plan.
First Republic shares skyrocket 10% after its banking heroes save the day
The recent fear of depositors withdrawing funds from the lender, following Silicon Valley Bank’s demise, caused a catastrophic plunge in First Republic’s stock. But in true superhero fashion, the bank’s new allies swooped in, turning the tide and sending shares soaring.
First Republic’s stocks made a triumphant comeback on Thursday afternoon, rallying from a 30% drop earlier in the day. The bank had been exploring strategic options, including a possible merger with a larger institution, to bolster its liquidity. S&P and Fitch had downgraded its credit to junk status, but the cavalry arrived just in time.
Despite the turmoil, First Republic assured everyone on Sunday that its liquidity position remained ‘very strong.’ The bank had already received a $70 billion boost from the Federal Reserve and JPMorgan Chase.
First Republic’s shares have taken a beating this year, dropping 80%. Investors had been targeting lenders with large amounts of uninsured deposits, resulting in Silicon Valley Bank being seized after clients withdrew funds in the face of rising interest rates and losses in the bank’s bond holdings.
According to First Republic’s latest 10-K filing, 68% of its deposits were exposed without FDIC insurance, while Silicon Valley Bank’s uninsured deposits amounted to a jaw-dropping 94%.
Wall Street is learning to protect one of its own. Especially those who became a big player like First Republic in private banking and catering to the Top 2% and a legion of small business owners.
Follow V Global Holdings for more commentary on navigating this market.
