Treasury Secretary Janet Yellen will reassure Congress during Thursday’s hearing that the banking system remains strong. Meanwhile, bank stocks headed for another day of losses on Thursday after US financial institutions took a hit on Wednesday.
Regional banks were lower in early trade, led by Bank of the First Republic (FRC) while evaluating strategic options, including a possible sale, Bloomberg reported late Wednesday. Larger banks pared losses before the bell after Tuesday’s pullback.
Secretary Yellen is scheduled to testify before the Senate Finance Committee beginning at 10:00 a.m. ET. She is expected to tell Congress “that our banking system remains sound and that Americans can be confident that their deposits will be there when they need them,” read prepared remarks. Yellen will also highlight the Federal Reserve and FDIC’s plans to support the banking system, including the new lending facilities.
First Republic exploring offer
Shares in First Republic Bank fell more than 31% early Thursday after Bloomberg reported that the San Francisco-based company is reviewing strategic options to boost liquidity, including a possible sale. FRC stock is down about 75% so far this month as the shutdowns of Silicon Valley Bank and Signature Bank sparked a banking crisis.
Rating agencies S&P Global and Fitch First Republic downgraded Wednesday, citing liquidity and funding risks. S&P downgraded FRC stock to a speculative BB+ from its previous A rating. Fitch gave First Republic a BB rating, down from A-, and placed the bank on negative rating watch. On Monday, Moody’s said it would review First Republic and five other regional banks for potential downgrades.
The news is a dramatic turn of events for First Republic. On Sunday, it secured additional liquidity from the Federal Reserve Bank and JP Morgan (JPM), bringing the total available funds to over $70 billion. First Republic CEO Jim Herbert told Jim Cramer the bank was conducting “business as usual” on Monday. At the time, Herbert noted that the bank wasn’t seeing many withdrawals over $250,000 and that the additional funding from JPMorgan was working.
“First Republic’s capital and liquidity positions are very strong and its capital remains well above the regulatory threshold for well-capitalized banks,” said CEO Jim Herbert in the financing announcement.
Regional banks followed the First Republic early Thursday. Based in Beverly Hills, California Pacific West Bank (PACW) opened at a loss of 18%. Zion Bancorp (ZION) fell 6.5% in the morning. Western Alliance (WHALE) fell more than 10%, erasing Wednesday’s 8.3% rebound.
JPMorgan fell 0.5% early Thursday after falling 4.7% on Tuesday. Wells Fargo (WFC) declined 0.3% after falling 3.2% on Wednesday. Goldman Sachs (GS) was trading down 1% after falling 3% on Wednesday.
Credit Suisse’s American Depositary Receipts rallied 7% after being injected by the Swiss National Bank in the amount of $54 billion. Credit Suisse ADRs tumbled as much as 30% on Wednesday.
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