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JPMorgan Chase has won the auction to take over fallen First Republic Bank, the Federal Deposit Insurance Corp. announced early Monday morning.
The deal will see America’s largest bank JPM assume all the deposits and “substantially all the assets” of First Republic FRC.
The deal will see First Republic depositors — which include 11 leading…
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Shares of PacWest Bancorp were shooting 15% higher in Tuesday’s aftermarket trading after the regional bank disclosed a rise in deposits in recent weeks.
PacWest PACW said alongside its first-quarter earnings report that total deposits rose to $28.2 billion as of March 31 from $27.1 billion when the company provided a March 20 investor update. The company saw deposit balances grow by an additional $700 million or so as of April 24.
The…
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Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance
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Whitney McDonald
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A little over a year ago, when Citigroup laid out a multiyear plan to boost shareholder returns, a big part of the strategy involved generating more income from its global wealth management unit.
Four quarters later, however, revenue growth in that segment remains challenged by fee headwinds and higher interest rates paid on deposits, particularly within Citi’s private bank, executives told analysts Friday during the megabank’s first-quarter earnings call.
For the quarter, global wealth management revenues dropped 9% year over year. In fact, over the past year, quarterly wealth revenues have been down or flat compared with each previous-year period.
Still, the $2.5 trillion-asset company is sticking to its global wealth blueprint, CEO Jane Fraser told analysts Friday during the company’s first-quarter earnings call. She cited “a lot of potential growth in Asia” and plans to start “scaling up in the U.S.” by building out investment offerings and cross-selling to Citi’s new and existing clients.
There’s also “tremendous potential growth” by tapping into Citi’s private bank and family office franchises as well as referrals from other business lines, according to Fraser. “We are not shifting our strategy in wealth,” she said.
Citi will soon add Andy Sieg, who since 2017 has been president of Merrill Wealth Management, Bank of America’s wealth management division. Sieg, who is set to join Citi in September, will succeed Jim O’Donnell as Citi’s head of global wealth management.
Sieg has “deep product and digital expertise” and is “a proven people leader,” Fraser said, adding that Citi “will certainly be taking full advantage of his expertise and experience in the U.S.”
“His mandate is consistent with the strategy we laid out at investor day,” Fraser said, referring to an event held in March 2022. “So the core of the strategy will not be changing with him coming on board.”
The consolidation of Citi’s wealth management businesses into a single division was one of the first big changes that Fraser made when she moved into the CEO role in March 2021. The reorganization brought wealth services for the ultrawealthy and less affluent under one umbrella.
As part of an effort to “double down on wealth,” Citi created four wealth hubs — in London, Singapore, Hong Kong and the United Arab Emirates — and hired hundreds of advisors and relationship managers to deliver more growth. At the bank’s investor day last year, Citi said segment revenues were projected to grow by high single digits to low teens in the next three to five years.
On Friday, both Fraser and Chief Financial Officer Mark Mason mentioned several positive developments in global wealth management, including a 3% increase in the number of client advisors on staff and an uptick in new client acquisition. That client acquisition occurred in both the private bank and through Citi’s “Wealth at Work” program, which provides financial and wealth services to professionals.
In addition, there were “notable improvements” in Asia, where global wealth management revenues rose about 20% from the fourth quarter of 2022, Mason said. The company has also been adding new products, he added.
“I feel like we are positioning ourselves for when this turns,” Mason said.
When asked by an analyst if Citi has any appetite for growing its global wealth management unit via acquisition, Fraser didn’t slam the door shut on potential opportunities. But she did say the company is concentrating on growing organically by making use of existing client relationships.
“I’m sure if something very attractive comes up, we’ll be very interested and looking at it,” Fraser said. “But it’s not something right now that I think makes sense, given where we’re focused.”
For the quarter, Citi reported total revenues of $21.4 billion, up 6% year over year, excluding the impact of selling certain overseas consumer franchises. Net income was $4.6 billion, which included $953 million related to the sale of Citi’s consumer business in India, the company said.
That compares to net income of $4.3 billion during the first quarter of 2022.
Taking out those same divestiture-related impacts, expenses rose 5% from the year-ago period as the company incurred costs related to its ongoing risk management overhaul and other risk and control investments, which led to an increase in staffing, salaries and benefits.
Citi’s forecasted revenue and expense guides for the year remained unchanged.
Deposits totaled $1.3 trillion, which was relatively flat year over year, in part because some wealth customers moved their deposits into fixed-income investments, the company noted.
Citi saw just under $30 billion of deposits flow into its system between early March and the end of the month, as customers yanked their deposits out of other banks amid industry turmoil.
Many of those deposits were tied to the commercial middle market base, and while it’s too soon to tell how deposit betas will evolve, “a good portion” of those deposits will “likely be sticky,” Mason said.
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Allissa Kline
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If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500
SPX,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.
Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
| Company | Ticker | Dividend yield | Dividend increase – 2022 | Expected dividend increase in 2023 | Expected dividend increase in 2024 |
| Altria Group Inc. |
MO, |
8.46% | 4.5% | 4.7% | 4.9% |
| Newell Brands Inc. |
NWL, |
7.55% | 0.0% | 0.1% | 0.6% |
| Boston Properties Inc. |
BXP, |
7.42% | 0.0% | 0.7% | 1.0% |
| KeyCorp |
KEY, |
6.99% | 5.3% | 6.7% | 6.8% |
| Prudential Financial Inc. |
PRU, |
6.08% | 4.3% | 4.7% | 4.8% |
| ONEOK Inc. |
OKE, |
5.87% | 0.0% | 2.2% | 2.4% |
| Healthpeak Properties Inc. |
PEAK, |
5.54% | 0.0% | 2.1% | 2.2% |
| Dow Inc. |
DOW, |
5.16% | 0.0% | 1.1% | 2.2% |
| Iron Mountain Inc. |
IRM, |
4.70% | 0.0% | 1.8% | 5.4% |
| NRG Energy Inc. |
NRG, |
4.50% | 7.7% | 7.9% | 7.9% |
| Franklin Resources Inc. |
BEN, |
4.50% | 3.6% | 4.3% | 5.7% |
| Federal Realty Investment Trust |
FRT, |
4.38% | 0.9% | 1.7% | 2.1% |
| Ventas Inc. |
VTR, |
4.26% | 0.0% | 3.3% | 5.5% |
| Kraft Heinz Co. |
KHC, |
4.14% | 0.0% | 0.7% | 0.8% |
| Source: FactSet | |||||
Click on the ticker for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
Don’t miss: This stock ETF keeps beating the S&P 500 by selecting for quality
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Andy Sieg is leaving Merrill Wealth Management for Citigroup, returning to the Wall Street rival he last worked for 13 years ago.
After a required six-month leave, Sieg will become the new head of Citi Global Wealth in September and report directly to Citi CEO Jane Fraser, according to an internal Citi memo dated March 30.
Sieg worked at Citi from 2005 to 2009. He had been at Bank of America’s Merrill since then, serving first as head of Global Wealth & Retirement Solutions, then as president of Merrill in 2017.
Sieg is replaced by Lindsay Hans and Eric Schimpf, who were named presidents and co-heads of Merrill Wealth Management. Both executives will report to Bank of America CEO and chairman Brian Moynihan.
The Merrill appointments were announced Thursday in a press release. They are effective immediately, a spokesperson for Merrill said in an email.
Sieg’s surprise departure, one of the biggest C-suite poaches on Wall Street and a move that impacts Merrill’s “thundering herd” of brokers and advisors, could position Citi to expand its wealth management footprint in the U.S. Sieg oversaw strategies at Merrill that more than doubled advisors’ average assets from new clients to $1.7 million over a decade.
“Andy’s decision to join Citi sends a strong signal about the potential of our wealth proposition and the attractiveness of our unique global offering,” Fraser said in the internal memo, which was provided by a Citi spokesperson. “Growing Wealth is a core pillar of our strategy and will improve our business mix by adding more fee-based revenue and drive improved returns.”
Fraser added in the memo that Citi’s new COO, Anand “Selva” Selvakesari — the bank’s former CEO of personal banking and wealth management who was promoted last week — had planned with her to find someone who “has a track record of driving growth, who has deep experience in the U.S. where we aim to grow significantly and who will be well positioned to drive global synergies between Wealth and our four other core businesses.”
Sieg’s experience at Merrill, where he oversaw 25,000 employees and around 15,000 advisors who managed a collective $2.8 trillion of assets, made him a prime candidate for the role.
“He also is no stranger to Citi, having worked at our bank for four years as a member of our Wealth team,” Fraser wrote in the memo.
In a statement, Sieg called his sudden move “a fantastic opportunity to build a leading wealth management business at the world’s most global bank at a time of massive wealth creation worldwide.
“There is a transformation underway at Citi, and I am excited about becoming part of a team that’s driven to deliver for clients, colleagues and shareholders.”
Just last month, new co-head Hans was a regional division executive. Merrill had promoted Hans to be the new head of private wealth management, international and institutional groups in February, following private wealth head Don Plaus’s sudden retirement.
Co-head Schimpf joined Merrill as a financial advisor in 1994, the release said. He “served for six years as division executive, first for the Southeast and most recently for the Pacific Coast. He also has been serving as co-head of the Enterprise Advisor Development program,” the bank said.
“Lindsay and Eric have excelled as leaders, delivering outstanding results for our advisors and clients,” Moynihan said in the statement announcing the changes. “I’m looking forward to them building on the success and long tradition of Merrill in the years ahead.”
The company declined to comment on Sieg’s move, but noted in its announcement that it appreciated Sieg’s leadership of Merrill “through a period of sustained growth and modernization of technology for advisors and clients.”
Under Sieg, the firm adopted a “Modern Merrill” strategy that included digitizing processes for advisors and helping them market more effectively online to clients, as well as improve the digital client experience. He also called for broader efforts within the firm as well as across the industry to improve outreach to what he termed the diversifying “face of wealth” in the U.S.
Sieg replaces Jim O’Donnell in the role at Citi, and O’Donnell will transition to be Executive Vice Chairman of Citi and Head of Senior Client Engagement, the Citi memo said.
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Victoria Zhuang
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Shortly after Silicon Valley Bank disclosed on March 8 that it was running short of cash and needed to raise capital, First Republic Bank’s epic stock slide began.
The stock
FRC,
has lost 90% of its value in less than two weeks, hitting an all-time low of $12.18 a share on Monday.
Supportive comments from Treasury Secretary Janet Yellen helped it snap back on Tuesday, but it’s hovering between positive and negative territory on Wednesday as investors await a key Federal Reserve decision on interest rates.
First Republic finds itself in a tough spot with a low share price and fresh debt downgrades and not even efforts to inject $30 billion into the company’s deposits in a scheme backed by JPMorgan Chase & Co.
JPM,
and a backstop from the U.S. Federal Reserve seem to be helping.
The bank’s troubles stem from its overlap both in clientele and parts of its balance sheet with doomed Silicon Valley Bank, which is being sold off this week by the Federal Deposit Insurance Corp. after it officially failed on Friday, March 10. Silicon Valley Bank suffered a classic run on a bank, when depositors, nervous that it needed to raise capital, yanked their deposits.
First Republic has suffered the same deposit flight.
As a San Francisco bank with a focus on serving high-end clients, First Republic has acted as wealth manager for the greater Silicon Valley region of executives, managing directors and startup CEOs, as well as their counterparts on the East Coast.
The list incudes Facebook
META,
Founder Mark Zuckerberg, who has a large mortgage courtesy of First Republic, as the Wall Street Journal has reported. Few of its loans ever sour — it had $213 billion in assets at the end of 2022 and $176 billion in deposits.
With its sophisticated lending products and access to the technology startup world, Silicon Valley Bank was also known for its a customer base from the venture capital and private equity world.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Those well-heeled clients of both banks started running into problems as interest rates rose last year, pundits warned of an economic slowdown and investors switched to a risk-off strategy of conserving cash and containing costs.
The collapse of FTX and strain in the crypto world also fed the need for cold, hard government-backed currency. Rising interest rates made it more expensive to borrow and put a chill on the deal-making environment.
All of this and other factors led to a drain on deposits at Silicon Valley Bank and others as it faced “elevated client cash burn” at a rate that was double pre-2021 levels, even as venture capital and private equity funds were slowing down their capital raising activities, the company said in an ill-fated mid-quarter report.
On March 8 after the market close, Silicon Valley Bank said it planned to sell $2.25 billion in common stock and a type of preferred stock, with one of its major clients, private equity firm General Atlantic, in line to buy $500 million worth. Goldman Sachs Group Inc.
GS,
was handling the deal.
The company also disclosed that it had lost $1.8 billion on the sale of $21 billion in available-for-sale securities on its balance sheet to cover deposit withdrawals.
It was this last part that caused big trouble for First Republic. Not only did its clientele overlap with Silicon Valley Bank, its holdings included some of the same securities that Silicon Valley Bank sold at a loss.
Wall Street investors quickly started bidding down shares of First Republic and other regional banks and the credit rating agencies moved in, cutting the bank’s rating from investment grade deep into junk in just a few days.
None of this helped First Republic hold on to its deposits.
As one longtime banking official said recently, money from Silicon Valley types typically comes in the form of uninsured deposits, which means they’re in excess of the $250,000 that the FDIC will guarantee if a bank goes out of business. This so called hot-money is great for banks when times are good, but can move away quickly if the environment changes.
“When hot money gets nervous, it runs,” former FDIC chairman Bill Isaac told MarketWatch recently.
While an unprecedented effort on March 16 by 11 banks to inject $30 billion into First Republic’s deposits temporarily provided a lift to its stock, the move apparently wasn’t enough.
First Republic said last Thursday that it had borrowed between $20 billion and $109 billion from the Federal Reserve during that week. It also increased short-term borrowing from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
Jefferies analyst Ken Usdin said the numbers revealed that First Republic’s total deposits had dropped by up to $89 billion in the week ended March 17 past week—or about three times more than the $30 billion injection from the bank.
“With [First Republic’s] earnings profile clearly impaired, the new deposits effectively bridge the estimated $30.5 billion of uninsured deposits still on [the bank’s] balance sheet, providing time for [it] to likely explore a sale,” Usdin said.
Janney Montgomery Scott analyst Tim Coffey said First Republic’s stock drop in recent days reflects uncertainty around what a potential second bailout would look like, or how the bank’s balance sheet is faring after a steep run in deposits and the falling value of its long-dated securities.
Another unknown is the company’s latest Tier 1 capital Ratio, a key measure of a bank’s balance sheet strength.
Like Silicon Valley Bank, First Republic’s balance sheet has had more than the usual exposure to long-dated securities, which have been falling in value as interest rates rise.
A typical mix for a bank of comparable size is to hold about 72% of securities as available for sale. The remaining 28% are held to maturity. First Republic’s mix is reversed with 12% available for sale and 88% held to maturity.
The bank’s mix of longer-dated assets now commands a lower market value, given where interest rates are. The bank’s emphasis on long-dated securities provided a better return when interest rates were near zero, but they have been a liability in the current environment.
“They’ve had duration risk where the value of their securities started going down as interest rates rose,” Coffey told MarketWatch.
Another problem for First Republic is that many of those long-dated securities are in the mortgage business, which has been ailing as interest rates rise.
Plenty of questions remain about First Republic’s situation and whether it could have been avoided. The challenges facing First Republic as well as the demise of Silicon Valley Bank and Signature Bank will be the focus of hearings on Capitol Hill next week.
Wall Street is also awaiting comments from the U.S. Federal Reserve when it updates its interest rate policy later on Wednesday.
And JPMorgan Chase continues to work with First Republic on a potential bailout, even as the bank has reportedly hired Lazard
LAZ,
to weigh strategic alternatives.
All of these factors add to the uncertainty swirling around First Republic, giving investors little reason to go long on the stock for now.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Related: Senate Banking Chair Sherrod Brown sees bipartisan support for changes to deposit insurance
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Shares of First Republic Bank dropped about 15% in the extended session Tuesday after news that the troubled bank reportedly has hired advisers to review its options and manage the crisis.
First Republic
FRC,
stock rallied 30% in the regular trading day Tuesday, buoyed by reports that JPMorgan Chase & Co.
JPM,
was working to help bolster the bank’s capital.
The Wall Street Journal reported late Tuesday that First Republic had tapped Lazard to help it review its options, and consultant McKinsey for post-crisis planning, citing people familiar with the matter. Options on the table include a sale, a capital infusion and asset sales, the sources said, according to the Journal.
Separately, Reuters reported Tuesday that the bank could downsize if a capital raise fails, and Bloomberg reported First Republic may rely on government backing to facilitate a deal to shore it up.
The bank issued “a message to our clients” late Tuesday, as its stock was falling in after-hours trading, that noted recent “unprecedented events,” and promised an update.
“Our commitment to client service is unchanged, and we remain well-positioned to continue to manage deposit activity,” the statement reads. “Today, as every day, we are processing transactions, opening accounts, funding loans, answering questions, and serving clients’ overall banking and wealth management needs.”
First Republic stock has swung wildly in recent days, ending Monday’s session at a record low, and several trade halts plagued it during the day.
San Francisco-based First Republic last week got $30 billion in deposits from 11 major U.S. banks, but the stock promptly resumed its slide as it suspended its dividend to preserve cash.
That followed the collapse of Silicon Valley Bank and Signature Bank earlier this month and contagion fears that have rocked bank stocks.
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First Republic Bank shares have been hit hard over the past week following the failures of two large U.S. regional banks,
Silicon Valley Bank and Signature Bank. On Thursday, shares of the bank and many other financial firms rallied after the biggest banks in the U.S. swooped in to rescue the San Francisco lender. Under the plan, 11 banks including JPMorgan Chase & Co. placed $30 billion in deposits at First Republic, using their own funds, confirming an earlier report by The Wall Street Journal.But Friday, shares of First Republic dropped anew, sinking more than 30% and leaving analysts to wonder whether it has a future as a stand-alone bank.
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Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank’s financial profile.”
First Republic’s
FRC,
debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.
The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term in light of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows,” Moody’s analysts said in a release.
They cited various recent developments with First Republic, including the company’s Thursday disclosure that over the previous week its Federal Reserve borrowings ranged from $20 billion to $109 billion. Also Thursday, the bank received a $30 billion deposit infusion from 11 major U.S. banks.
“Moody’s believes the high cost of these borrowings, combined with the high proportion of fixed rate assets at the bank, is likely to have a large negative impact on First Republic’s core profitability in coming quarters,” the analysts said. “In addition, the rating agency noted that while the news of the banking consortium’s deposits is positive in the short-run, the longer-run path for the bank back to sustained profitability remains uncertain.”
First Republic is reportedly looking to raise money from other banks or private-equity firms by selling additional shares, according to the New York Times.
Shares of the company have plunged 80% from the close of trading on March 8, just before Silicon Valley Bank spooked investors with an update on its business and a planned stock sale. First Republic lost 33% in Friday’s session despite the deposit arrangement with the large banks. Shares were down another 6% in the extended session Friday.
Moody’s said its outlook was maintained at “rating under review.” That review for downgrade, it said, “reflects the continuing challenges to the bank’s medium-term credit profile in light of its significantly eroded deposit base, increased reliance on short-term wholesale funding and sizeable volume of unrealized losses on its investment securities.”
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After what felt on Wednesday like relative calm in the banking industry compared with the chaos of the five previous days, uncertainty returned early Thursday amid concerns about the stability of Swiss lender Credit Suisse and the future of First Republic Bank in San Francisco.
Despite the announcement of an emergency lifeline designed to support the troubled Credit Suisse, U.S. markets opened the day reeling, with shares of First Republic falling more than 30% in early morning trading and other declines in regional bank stocks.
But by midafternoon, 11 of the nation’s largest banks rode to the rescue with a pledge of $30 billion of deposits to stabilize First Republic’s balance sheet after a depositor exodus. The move was also a bid to instill confidence in an industry that has endured two bank failures, a mountain of liquidity concerns and a whole lot of jitters in the past week.
Now the question is: Will it work?
“Our expectation is that calmer heads will prevail,” Michael Driscoll, head of North American financial institutions at DBRS Morningstar said in an interview just as the First Republic deal was announced. “Regulators are doing their jobs, and things will stabilize.”
The tactic — in which big banks band together to prop up another bank by injecting deposits — is an unusual strategy, experts said. The cash infusion is being made in the form of interest-bearing deposits from participating banks. The funds are the banks’ own and not those of their customers or of First Republic customers who have withdrawn money from their First Republic accounts in recent days and parked those deposits at the larger banks, sources said Thursday.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — the nation’s Big Four banks by assets — have each committed $5 billion of uninsured deposits to First Republic, while Goldman Sachs and Morgan Stanley have committed $2.5 billion, according to a joint statement released by the banks on Thursday afternoon.
U.S. Bancorp, PNC Financial Services Group, Truist Financial, Bank of New York Mellon and State Street are each placing $1 billion of deposits, the statement said.
The additional liquidity comes five days after the $212.6 billion-asset First Republic, which specializes in private banking and wealth management, touted its financial position after announcing in a press release that it received more borrowing capacity from the Federal Reserve and the “ability to access additional financing through JPMorgan Chase.”
On Sunday night, around the same time the federal government said it would cover uninsured deposits at both Silicon Valley Bank in Santa Clara, California, and New York-based Signature Bank — which had failed within two days of each other — First Republic issued a statement saying that it had more than $70 billion of unused liquidity. The $70 billion figure excluded any additional liquidity that the company could receive under the Bank Term Funding Program, or BTFP, also announced Sunday night.
By the end of Wednesday, First Republic reported a $34 billion cash position in a regulatory filing.
“I personally thought [those measures] would fix some of the issues with First Republic, but obviously they continued to have significant pressure this week,” Driscoll said.
Regulators lauded the cash infusion Thursday afternoon. In a joint statement, Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, Federal Deposit Insurance Corp. Chair Martin Gruenberg and acting Comptroller of the Currency Michael Hsu called it a sign of strength for the banking sector as a whole.
“Today, 11 banks announced $30 billion in deposits into First Republic Bank,” the regulators said in a written statement. “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”
The Fed issued a separate statement encouraging any banks in need of liquidity to turn to the BTFP, which allows banks, credit unions and other depositories to pledge assets as collateral for penalty-rate loans. Through Wednesday, the central bank disclosed that banks had taken nearly $12 billion of advances from the emergency liquidity vehicle and had pledged nearly $15.9 billion of government-backed bonds — including Treasury securities, U.S. agency mortgage-backed securities and U.S. agency debt securities.
At least one analyst expressed some skepticism about whether the deposit injection at First Republic will make a difference as more problems might lurk under its hood.
In a research note, Autonomous Research analyst David Smith said First Republic’s stock has “been on a roller coaster over the past week” following the demise of Silicon Valley Bank and Signature Bank, both of which experienced significant deposit withdrawals after customers became spooked about their financial well-being.
First Republic “was also seeing rapid deposit outflows,” so much so that S&P Global on Wednesday downgraded the company’s credit to below investment grade, Smith noted.
Two other credit ratings agencies, Moody’s Investors Service and Fitch Ratings, also made changes to the company’s ratings. Fitch downgraded the company’s ratings, while Moody’s placed the ratings under review for a downgrade.
“It remains to be seen what will happen to core client deposit flows at [First Republic Bank] from here and indeed what has happened to date this quarter, which will ultimately drive the company’s fate,” Smith wrote.
Earnings could suffer if many of the deposits drained from the bank were lower-cost and the big banks’ market-rate deposits are costlier, according to Smith. A need to steeply mark down liabilities could scare off a potential buyer, too.
“First Republic’s situation remains challenged, in our view, although today’s actions seem to have bought the company time at the least,” Smith wrote.
Big banks — often criticized for receiving government bailouts, as they did in the 2008 financial crisis — positioned themselves Thursday as being part of the solution to the crisis that has hit regional banks in the past week.
The plan is an “unprecedented private sector collaboration … to bolster liquidity and reflects our confidence in the critical role of regional banks in our economy,” Truist CEO Bill Rogers said in a statement.
The markets seemed to like it. The Dow Jones Industrial Average, which at one point in the day was off more than 250 points from its open, finished at 32,246.55, up 1.17% from a day earlier. First Republic rose more than 10% by day’s end, though it began losing ground in after-hours trading Thursday night.
Most regional stocks that had drawn scrutiny lately finished in the green, though some closed stronger than others.
What’s unclear is whether Thursday was a turning point in a crisis that has taken down Silicon Valley, Signature and Silvergate banks or was another positive blip in a more protracted period of volatility.
The condition of other regionals will be watched closely. For instance, Reuters reported Thursday that PacWest Corp. in Los Angeles was in talks with Atlas SP Partners and other investment firms about a liquidity boost.
Kyle Campbell contributed to this story.
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Allissa Kline
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Bank of America BAC, Citigroup C, JPMorgan Chase JPM and Wells Fargo WFC said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank FRC as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.
However, First Republic stock fell 14.7% in after-hours trading after the bank said it would suspend its dividend to conserve cash. The bank last paid a quarterly dividend of 27 cents a share on Feb. 9 to shareholders of record as of Jan. 26.
It…
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U.S. bank stocks ended regular trading with solid gains on Thursday, as banks announced a $30 billion deposit capital infusion for First Republic Bank and as Treasury Secretary Janet Yellen cited the strength of the financial system.
The 11 banks confirmed a report from the Wall Street Journal and others about providing financial support for First Republic Bank FRC.
U.S….
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Trading in shares of First Republic Bank and Western Alliance Bancorp ended sharply lower in a tough day of trading for regional banks as fears over bank solvency persisted following the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital.
Stocks were periodically halted or paused for trading amid the bank stock bloodbath, which saw many suffering percentage declines well into the double digits. Typically, bank stocks are stable compared with sectors such as technology, with daily moves above 5% being relatively…
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For community banks, marketing often points to finding ways to educate, support and grow community, as well as customer knowledge and awareness.
True relationships withstand the test of time, and such is the case with the community bank/customer connection. It’s not unusual to hear about a community bank having served a family or a business for generations, and that’s a testament to the strength of the relationship.
As we consider marketing in this month’s issue, I took time to reflect on exactly what differentiates the community banker and how marketing can help in growing and retaining business. I kept coming back to the fact that for community banks, marketing often points to finding ways to educate, support and grow community, as well as customer knowledge and awareness. By extension, these promotional efforts assume a natural role in a community bank’s journey, just enhancing what are already mission-critical initiatives.
I’ll be connecting with community bankers from around the country at ICBA LIVE in Honolulu, Hawaii, from March 12–16. I hope to see you there!
For example, consider ICBA chairman Brad Bolton’s Community Spirit Bank in Red Bay, Ala., and its work to share tips for financial resolutions in the local paper. Offering that information to the community helps individuals strengthen their financial savvy and supports a broader story of community bank leadership.
Or look to ICBA past chairman Bob Fisher’s bank, Tioga State Bank in Spencer, N.Y., and how it teams up with local television stations to support cause-related activities, like the No Shave November Cure the Blue 5K. Not only does this event help raise funds for an important program, it also demonstrates the bank’s commitment to its community.
These examples offer only a snapshot of what community banks all over the country do to support their communities from a mission-based approach. In many cases, the added promotion these efforts deliver is a side benefit to serving the community.
That’s precisely why these efforts are successful: They garner attention because they are the right things to do. These stories create a value proposition around why banking with a community bank is so vital, and the differentiation from megabanks and credit unions happens by leading with the community bank relationship model front and center.
So, as you think about your bank’s planned storytelling this year, know that ICBA is standing by to help. In fact, stay tuned for a very exciting announcement that we’ll be making during ICBA LIVE, which will shine a light on what differentiates community banking. And our work won’t stop there. We invite to you join us as we continue to tell the community banking story.
Because beyond marketing, what you do matters to the customers and communities you serve. You are and will remain a partner through your customers’ lives and financial journeys. From a marketing perspective, that’s an ideal place to be.
Rebeca Romero Rainey
President and CEO, ICBA
Connect with Rebeca @romerorainey
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Lauri Loveridge
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