/cloudfront-us-east-2.images.arcpublishing.com/reuters/CRTWSGEBN5O4BFFVFMKPMBYCWI.jpg)
March 13 (Reuters) – First Republic Bank’s shares (FRC.N) more than halved in premarket trading on Monday as news of fresh financing failed to reassure investors days after SVB Financial Group’s (SIVB.O) downfall ignited fears of contagion in the banking sector.
The U.S. regional lender on Sunday said it had secured additional financing through JPMorgan Chase & Co (JPM.N) and the U.S. Federal Reserve, giving it access to a total of $70 billion in funds through various sources.
Despite the cash infusion, Raymond James double downgraded the bank’s stock to “market perform” from “strong buy”, highlighting the risk of deposit outflows that First Republic faces from panicked large depositors after the bank run at SVB last week.
While the bank is better positioned for potential deposit outflows than it may have been before the additional financing, if there are net deposit outflows, it will shrink the earnings power of First Republic, Raymond James analyst David Long wrote in a note.
First Republic’s stock was last down 64% at $28.95 on Monday.
“The real issue for the industry is that there is a crisis of confidence in the stickiness of deposits and when that becomes dislocated, things can move very quickly,” said Christopher McGratty, head of U.S. Bank Research at investment bank KBW.
U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank (SIVB.O) threatened to trigger a broader financial crisis.
First Republic’s shares were leading losses among other regional lenders, with Western Alliance (WAL.N) down 52% and PacWest Bancorp (PACW.O) 36%, while Zions Bancorp (ZION.O), Comerica Inc (CMA.N) and Truist Financial Corp (TFC.N) shed between 7% and 18% in trading before the bell.
Among big banks, Bank of America Corp (BAC.N) dropped 4%, Citigroup Inc (C.N) fell 2% and Wells Fargo (WFC.N) slid 3.3%.
Our Standards: The Thomson Reuters Trust Principles.
