Shares of First Republic Bank fell nearly 40 percent in pre-market trading Monday, days after announcing the distressed lender would do so. Receive a $30 billion lifeline from some of the largest banks in the United States.
Before the bell, shares in the bank — which has emerged as one of the leading indicators of current banking volatility — fell as much as 37 percent, spanning a ten-day period that saw their value drop an entire 80 percent in a matter of days.
Since then, stocks have recovered slightly as of 8:30 a.m., while many banks were left reeling in the aftermath of the latest SVB crash and saw some stabilization – after US officials insisted deposit outflows slowed last week.
Since the fall of the SVB, depositors have been fleeing en masse from regional lenders, creating a ripple effect that has threatened to upset the US economy and many banks, including First Republic.
On Friday, in an unprecedented show of support from 11 baking giants including JPMorgan Chase and Bank of America, the bank was given a multibillion-dollar lifeline, at the time hailed by the US Treasury Department as “very welcome,” And a demonstration of the “flexibility” of the US banking system.
Shares of First Republic Bank fell about 40 percent in pre-market trading on Monday, days after it was announced that the troubled lender would receive a $30 billion lifeline from some of America’s largest banks.
Before the bell, shares in the bank — which has emerged as one of the leading indicators of current banking volatility — fell as much as 37 per cent, spanning a ten-day period that saw their value drop an entire 80 per cent in a matter of days.
The recent movement in its share price seems to indicate otherwise – and injections of uninsured cash from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist and US Bank Perhaps not enough to solve the growing crisis of the lender.
Traders raised bets that the Federal Reserve may pause interest rate hikes on Wednesday to ensure financial stability as the cascading collapse of SVB and Signature Bank threatens to spiral into a larger crisis.
Over the weekend, UBS agreed to buy rival Credit Suisse for $3.23 billion, in a shotgun merger designed by Swiss authorities to avoid further market-shaking turmoil in global banking.
US-listed Credit Suisse shares fell 58.4% in pre-market trading and are set to open at a new record high, while UBS shares fell 3.6%, as focus turned to some Credit Suisse bondholders hurting from the takeover.
However, US stock futures retreated from session lows. Lower Treasury yields on bets on less aggressive policy moves from the Fed supported gains in some technology and growth stocks such as Apple and Microsoft.
“Traders are looking for short-term opportunities ahead of the Fed meeting on Wednesday,” said Jason Braid, chief investment officer of private wealth at Glenmead.
Investors remain concerned about the banking industry, even though UBS has agreed to take over Credit Suisse. They’re still a little concerned that there are other banks out there that need support that we’re not familiar with.
Traders’ bets are now tilted towards the no hike scenario, with 39% expecting the Fed to raise interest rates by 25 basis points.
Investors are also awaiting economic data including existing home sales, weekly jobless claims and durable goods this week to gauge the strength of the US economy.
At 6:44 a.m. ET, the Dow e-minis were up 10 points, or 0.03%, the S&P 500 e-minis were up 3.5 points, or 0.09%, and the Nasdaq 100 e-minis were up 13.25 points, or 0.1%. .
Major central banks also moved on Sunday to boost the flow of liquidity around the world, with the Federal Reserve introducing daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the euro zone have the dollars they need to operate.
Major US banks such as JPMorgan Chase & Co., Citigroup and Morgan Stanley fell between 0.2% and 1.2%.
Regional First Republic Bank fell 19.1% after paring some declines, while Western Alliance Bancorp fell 0.7%.
However, shares of BacWest Bancorp rose 6.3%.
On Friday, the S&P Banking Index and the KBW Regional Banking Index posted their biggest drop in two weeks since March 2020.
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