Numerous giant US banks have joined forces to deposit $30 billion in the San Francisco headquartered First Republic Bank.
“Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank.
Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY‑Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion,” the banks said in a statement.
First Republic has seen a tumulus month with its stock price crashing 74% last week from $115 dollars to $35.
They had $212 billion in total assets as of last year, but came under scrutiny following the collapse of the Silicon Valley Bank.
First Republic revealed in its annual report that the fair-market value of its “real estate secured mortgages” was $117.5 billion as of Dec. 31, or $19.3 billion below their $136.8 billion balance-sheet value. The fair-value gap for that single asset category was larger than First Republic’s then $17.4 billion of total equity, with their stock market cap now standing at about $6 billion.
That led to concerns from investors who sold off the stock, with the bigger banks now trying to assure the market.
“We are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said. “America’s larger banks stand united with all banks to support our economy and all of those around us.”
The Federal Reserve Banks, as well as the Department of the Treasury, FDIC and OCC, applauded this move in a joint statement:
“Today, 11 banks announced $30 billion in deposits into First Republic Bank. This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”
This is the first time in living memory that banks take such action, with it conjuring images from the books of a century ago when the then living JP Morgan bailed out the banks.
Whether the situation is as dire is anyone’s guess as the market waits for the effects of 0 to 5% interest rates to clear, but the extraordinary action presumably speaks of extraordinary times as central banks and now some commercial banks sit on huge losses from asset investments.
