Multiple US regional banks face trouble amid banking crisis
The implosion of First Republic Bank on Monday follows the earlier collapses of Silicon Valley Bank and Signature Bank two months ago.
As the financial sector continues to experience turbulence, investors unnerved by First Republic Bank's collapse are offloading shares in other major regional banks, signaling that confidence in the industry has yet to recover.
The implosion of First Republic Bank on Monday follows the earlier collapses of Silicon Valley Bank and Signature Bank two months ago. Each of these firms had a majority of clients with account balances significantly exceeding the $250,000 threshold insured by the Federal Deposit Insurance Corporation (FDIC), the Daily Wire reported.
To mitigate the risk of bank runs at other firms, the government-backed company stepped in to secure both insured and uninsured deposits at the two latter institutions.
Despite these measures, investor confidence in the industry's stability remains shaky. As of early Tuesday afternoon, shares in PacWest had dipped nearly 25%, while Western Alliance shares were down more than 19%. Additionally, shares for Zions and Comerica each dropped 12%, and KeyCorp shares fell 10%.
The FDIC's takeover and subsequent sale of First Republic Bank to JPMorgan Chase came days after the bank's first-quarter earnings report revealed a 41% drop in deposits from $176 billion on December 31 to $104 billion on March 31.
This decrease includes a $30 billion loan provided by major financial institutions like Wells Fargo, Bank of America, and Citigroup, as well as JPMorgan Chase. The federal government facilitated this deal to maintain First Republic Bank's solvency. Similarly, PacWest saw its deposits plunge 17% over the same period, from $34 billion to $28 billion, while deposits at Western Alliance fell over 11%, from $54 billion to $48 billion.
Investors' continued hesitance comes in spite of reassurances from JPMorgan Chase CEO Jamie Dimon, who claimed that outflows at regional banks have largely stabilized. “There may be another smaller one, but this pretty much resolves them all. This part of the crisis is over,” he said in a call on Monday. “Down the road, there are rates going way up, real estate, recession, that's a whole different issue. But for now, everyone should just take a deep breath.”
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