First Republic shares sink on contagion fears, dragging down US regional banks

March 13 (Reuters) – Shares of U.S. regional banks fell on Monday, with heavy losses in First Republic Bank ( FRC.N ) following the collapse of SVB Financial Group ( SIVB ) as news of fresh funding failed to ease fears of a possible bank contagion. .O) and Signature Bank (SBNY.O).

JPMorgan Chase & Co ( JPM.N ) added additional financing, Jim Herbert, executive chairman of San Francisco-based First Republic, a mid-cap lender, told CNBC.

Herbert’s comments didn’t keep the stock afloat. There were several trading halts as the stock fell, last down 67% to $28.05.

In response to Reuters queries, the bank’s spokesperson said, “The bank continues to serve the needs of our customers by opening accounts, disbursing loans and making transactions at our offices and online.

Western Alliance ( WAL.N ), KeyCorp ( KEY.N ), Comerica Inc ( CMA.N ), Huntington Bancshares Inc ( HBAN.O ) and PacWest Bancorp ( PACW.O ) fell as much as 16%, while other regional lenders also fell. and 29%.

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Bank stocks saw multiple trading halts as the KBW Regional Bank Index (.KRX) fell 5.4% and the S&P 500 Bank Index (.SPXBK) fell 6%.

“The real issue for the industry is that there is a crisis of confidence in the stickiness of deposits and if that moves, things can move very quickly,” said Christopher McCratty, head of US banking research at investment bank KBW.

US President Joe Biden has vowed to do whatever it takes to deal with a potential banking crisis. On Sunday, national regulators took emergency steps to maintain confidence in the system, and First Republic secured additional financing from JP Morgan and the U.S. Federal Reserve, bringing the total to $70 billion in funding.

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Despite the cash infusion, Raymond James doubled the bank’s shares, highlighting the risk of deposit outflows First Republic faces from panicked large depositors after the bank’s run on SVB.

Founded in 1985, First Republic had $212 billion in assets and $176.4 billion in deposits at the end of last year, according to its annual report.

About 70% of its deposits are uninsured, higher than the 55% average for mid-sized banks and the third highest in the group behind Silicon Valley Bank and Signature Bank, Bank of America said in a note.

Bank of America cut its price target on the stock to $90 from $140.

The banking corridor, which follows several central bank interest rate hikes over the past year, has lowered the yield on the 2-year Treasury note since the 2008 financial crisis.

Art Hogan, chief market strategist at B. Riley Wealth, said the market is “finding out in real time what the risk of interest rates rising at such a fast pace can do to the balance sheets of some regional banks.”

Hogan said each regional bank has its own exposure to different parts of the market. “For example, if you’re a regional bank with commercial real estate, office real estate is not a positive … You saw all the regional banks in Texas in the energy crisis because of their oil exposure.”

He said the fate of regional bank stocks will be “case by case” as investors look to see which may have the most negative exposure. Other traders wondered whether panic could become self-fulfilling, pushing people to move funds from small lenders to big banks.

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Among Wall Street lenders, Bank of America Corp ( BAC.N ) fell 3.3%, Citigroup Inc ( CN ) and Wells Fargo ( WFC.N ) each fell 6%, while lenders in Asia and Europe also fell.

The Federal Home Loan Banks (FHLB), a U.S. lending system that primarily helps banks and other member financial institutions to help customers get mortgages, is seeking to raise about $64 billion by selling short-term notes, Bloomberg News reported.

Reporting by Medha Singh in Bangalore, Tatiana Bacher in New York; Editing by Shinjini Ganguly and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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