A group of 11 of the largest U.S. banks said Thursday they are sending a combined $30 billion to shore up First Republic Bank, a rare move by financial industry rivals to strengthen a regional lender buffeted by the sudden collapse of Silicon Valley Bank.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they plan to contribute $5 billion each; Goldman Sachs and Morgan Stanley will each chip in $2.5 billion; and BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank are adding $1 billion each.
In a joint statement Thursday, the banks said that the cash infusion shows “confidence in First Republic and in banks of all sizes.”
Federal regulators from agencies including the U.S. Treasury Department and the Federal Deposit Insurance Corporation said in a statement that the “show of support by a group of large banks is most welcome” and that the collective action “demonstrates the resilience of the banking system.”
Investors have kept a wary eye on San Francisco-based First Republic and other regional banks since California regulators seized SVB on March 10. With questions swirling about First Republic’s financial stability, its stock price has slumped in recent days — the ride got wilder on Thursday, with its shares tumbling as much as 36% in early trading before closing the day up 10%.
Moody’s downgraded First Republic’s credit rating earlier this week, noting that the bank is “more sensitive to rapid and large withdrawals from depositors” than its peers. First Republic has also seen its market value shrink from more than $22 billion in January to less than $7 billion.
As with Silicon Valley Bank, a significant share of First Republic’s deposits are uninsured, which makes it more prone to withdrawals from skittish customers. The bank holds $212 billion in assets under management and has about 7,200 employees.
Excluding the new deposits from the banks, as of Wednesday First Republic had roughly $34 billion in cash, the company said in a statement. First Republic also said that the flow of deposits leaving the bank has “slowed considerably” in recent days and that its level of “insured deposits” has “remained stable.” To conserve cash, the lender will suspend its stock dividend.
“The bank is focused on reducing its borrowings and evaluating the composition and size of its balance sheet going forward,” the company said.
CEO Mike Roffler said earlier this week that the bank has a “very strong” amount of capital, citing $70 billion available for operations.
Pacific West, Zions, Western Alliance and other regional banks saw their stocks plummet this week after SVB’s sudden seizure by financial regulators spooked investors. Many of those stocks regained ground Tuesday after President Biden reassured Americans they can have confidence in the U.S. banking system, and regulators pledged that all deposits at SVB would be available to customers.
Treasury Secretary Janet Yellen on Thursday sought to allay concerns about the stability of U.S. banks in an appearance before the Senate Finance Committee.
“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she told lawmakers. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remains strong and that depositors’ savings remain safe.”