(Bloomberg) – Shares of First Republic Bank fell during post-market trading as the crisis was far from over despite big banks’ efforts to restore confidence by agreeing to add $30 billion deposits to the lender.
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Share price volatility continued after First Republic suspended dividend payments, revealed a shrinking cash position ahead of the bailout and said it borrowed billions from the Federal Reserve during the week last. The stock fell 17% in post-trade trading, after gaining 10% in the regular session.
Nearly a dozen major banks, including JPMorgan Chase & Co. and Citigroup Inc., banded together Thursday in a show of support for the First Republic at the suggestion of Treasury Secretary Janet Yellen. As the bailout attempt helped boost sentiment in global markets, billionaire investor Bill Ackman was among those who wondered if it would be enough to stem the crisis.
The move spreads the risk of financial contagion to big banks, creates “a false sense of trust” and is “bad policy,” Ackman, the founder of investment firm Pershing Square, said in a tweet.
First Republic’s jump during normal trading hours on Thursday had made it one of the best performing SPDR S&P Regional Banking ETFs.
In a statement after the official closing of U.S. exchanges, First Republic said its borrowings from the Fed ranged from $20 billion to $109 billion from March 10 to March 15. The bank said it had cash of about $34 billion on March 15; it had reported $70 billion in idle cash on March 12.
“With the new funds added to market rates, we expect earnings to be revised lower for the next several quarters,” wrote Andrew Liesch, an analyst at Piper Sandler who holds a neutral rating on First Republic, in a note. “We believe this will be a headwind for the stock in the near term, as much of the bank’s earning assets are tied to fixed rates and have below-market yields with limited repricing benefits on the horizon. .”
Read more: Banks launches First Republic lifeline with Yellen, Dimon’s Cajoling
First Republic specializes in private banking and wealth management, and has tried to differentiate itself from Silicon Valley Bank, the tech-focused lender that collapsed earlier this month and sent shockwaves in the financial sector. Investors in the sector are on edge over the upheaval in US regional lenders as well as the tumult around Credit Suisse Group AG.
–With help from Maxwell Zeff and Naoto Hosoda.
(Updates with aftermarket price movement in second paragraph, Bill Ackman adds from third paragraph.)
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