A consortium of financial institutions has committed to depositing $30 billion in First Republic Bank, signaling their trust in the banking system, according to a joint announcement made on Thursday. Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo will each deposit around $5 billion, while Morgan Stanley and Goldman Sachs will contribute about $2.5 billion each. Meanwhile, State Street, Truist, Bank of New York Mellon, U.S. Bancorp, and PNC will deposit roughly $1 billion each.
In a statement, the group of banks said that their deposit of $30 billion in First Republic Bank demonstrates their confidence in banks of all sizes and their commitment to helping banks serve their customers and communities. The banks, including Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Truist, PNC, U.S. Bancorp, State Street, and Bank of New York Mellon, will contribute varying amounts to the deposit.
According to BNN breaking sources, the deposits are required to stay at First Republic for at least 120 days. Initially, regional bank stocks declined on Thursday, but reports of the deposit plan led to a reversal in the stocks’ direction.
The recent collapse of the banks
In light of the recent collapses of Silicon Valley Bank and Signature Bank, which had high amounts of uninsured deposits, First Republic’s stock has taken a hit in the past few days. There were concerns that customers would withdraw their money. However, several major banks have now agreed to deposit $30 billion into the First Republic, which is uninsured.
On Thursday, First Republic Bank’s stock dropped below $20 per share, from a closing price of $115 per share on March 8. The stock experienced several halts during the trading session, but eventually rose to $40 per share, up over 20% on the day. Despite the bank’s announcement on Sunday that it had over $70 billion in liquidity, excluding potential funds from the Federal Reserve’s Bank Term Funding Program, investors continued to sell off the stock due to concerns over the high number of uninsured deposits.
In a joint statement, the Federal Reserve, Treasury Department, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency expressed their appreciation for the deposits made by the larger banks, which will contribute to First Republic’s liquidity. They also remarked that this show of support highlights the resilience of the banking system.
During the financial crisis, larger banks bought struggling banks at a discount to stabilize the banking system. However, due to unrealized losses on First Republic’s bond portfolio from last year’s rapid increase in interest rates, an acquisition is now unattractive, according to sources.
The markdown of First Republic’s held-to-maturity bond portfolio is estimated to create a $25 billion gap on the bank’s balance sheet. First Republic typically serves high-end clients and businesses, including wealth management and residential real estate loans. The bank reported over $212 billion in assets as of December 2022 and generated more than $1.6 billion in net income last year which has become a huge BNN breaking sensation.