[Article mis à jour vendredi 17 mars, à 15h10]
The rescue of troubled banks continues. After the bankruptcies of SVB, Signature Bank and Silvergate last week and the ensuing federal guarantee of deposits, after the difficulties in Europe of Credit Suisse, well helped by a loan of 50 billion Swiss francs of the Swiss central bank, an alliance of eleven major American banks (Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist and US Bank) decided this Thursday to come to the rescue of First Republic.
First Republic, the 14th largest US bank by assets, received $30 billion in deposits from this banking alliance. Objective: to reassure customers who might have been tempted to prefer to move their money to establishments that do not present a priori any risk of bankruptcy, and thus prevent this bank, which mainly serves wealthy customers, from becoming the next domino to fall after three bankruptcies. in a row.
But at the opening of Wall Street, the maneuver did not reassure at all. Iaction of First Republic lost more than 13% in electronic trading before the opening of Wall Street. And that of Credit Suisse relapsed sharply on Friday (by more than 10% around 12:00 GMT).
Stock market fall
Already closely watched for a few days, the bank had indicated on Sunday that it had “strengthened and diversified its liquidity” and had 70 billion dollars thanks to facilities offered by the American central bank, and to JPMorgan Chase. Insufficient in the eyes of the rating agencies S&P Global Ratings and Fitch, which on Wednesday lowered the rating they give to the debt of the company in the category of speculative investments. Having already tumbled 73% in a week, First Republic’s stock was down as much as 36% on Thursday after a Bloomberg report claimed the bank was exploring “strategic options” for its future, including a possible sale. However, the stock recovered as rumors emerged of a possible joint intervention by the big banks. It ended up 12%.
In detail, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, the four largest banks in the country by asset size, are expected to contribute $5 billion each. The investment banks Goldman Sachs and Morgan Stanley must pay 2.5 billion each while BNY Mellon, PNC Bank, State Street, Truist and US Bank must pay 1 billion.
Help worked
The measure worked. The total amount of daily withdrawals “has slowed significantly,” claims First Republic. “The bank will now focus on reducing its borrowing and assessing the composition and size of its balance sheet,” add its leaders.
Founded in 1985 and headquartered in San Francisco, First Republic provides personal and corporate private banking and wealth management services, primarily in California and the East Coast. It has grown rapidly in recent years, rising from $22 billion in assets at the end of 2010 to $212 billion at the end of 2022.
This collective aid was welcomed by the American authorities, the Ministry of the Economy, the central bank (Fed) and two financial regulators, saying in a separate press release that it “demonstrates the resilience” of the banking system.
The Fed said on Thursday that it had lent nearly $12 billion to banks since Sunday, via a new specific program, intended to allow them to honor withdrawal requests from their customers. The usual very short-term loans jumped, over one week, from barely 5 billion dollars to 152 billion.
The institution also lent $142.8 billion to the two entities created by regulators to succeed SVB and Signature Bank – a New York brand closed on Sunday by the American regulator. Wall Street now has “hope that the worst is behind us,” said Maris Ogg of Tower Bridge Advisors. “If you take the First Republic and Credit Suisse bankruptcies out of the equation, it calms people down. »
“I don’t think we’re going to do 2008 again”, foresees the manager, “because the problem does not come from the credit portfolios but from the fact that (the American central bank) raised its rates from 0 to 4, 50% in nine months. »