First Republic Bank, the latest casualty in the ongoing banking turmoil, said it has secured around $30 billion funding from America’s 11 largest banks as a lifeline, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.
Following the news, the bank’s stock, which has been sinking since last week, gained around 10% on Thursday from the previous day’s close. In pre-market activity on the NYSE, the shares are currently down 5 percent.
The rescue fund is expected to help the firm meet customer withdrawals amid the ongoing struggles following recent failures of U.S banks Silicon Valley Bank and Signature Bank, deemed as the biggest U.S. banking failures since the 2008 financial crisis.
Credit Suisse Group AG also received a lifeline of up to 50 billion Swiss Francs or around $54 billion from the Swiss National Bank after the Swiss banking major lost much of its value in the wake of banking industry turmoil.
In a statement, First Republic Bank said it received uninsured deposits from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank.
As per the deal, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley contributed $2.5 billion each, while BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank made an uninsured deposit of $1 billion.
Jim Herbert, Founder and Executive Chairman, and Mike Roffler, CEO and President of First Republic Bank said, “Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system.”
Meanwhile, the supporting banks, in a joint statement, said their action reflects their confidence in First Republic and in banks of all sizes, adding that regional, midsize and small banks are critical to the health and functioning of the country’s financial system.
The banks noted that there were outflows of uninsured deposits at a small number of banks following the receiverships of Silicon Valley Bank and Signature Bank.
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most. Smaller- and medium-sized banks support their local customers and businesses, create millions of jobs and help uplift communities. America’s larger banks stand united with all banks to support our economy and all of those around us,” they said.
As previously announced, First Republic Bank obtained additional liquidity through additional borrowing capacity. It has since drawn on this borrowing capacity following recent industry events.
As of March 15, First Republic Bank had a cash position of around $34 billion, not including the latest $30 billion of uninsured deposits with an initial term of 120 days at market rates.
From March 10 to March 15, Bank borrowings from the Federal Reserve varied from $20 billion to $109 billion at an overnight rate of 4.75%.
Since close of business on March 9, the Bank has also increased short-term borrowings from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
First Republic Bank said it is focused on reducing its borrowings and evaluating the composition and size of its balance sheet going forward. The Bank’s Board of Directors has determined to suspend its common stock dividend.
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