First Republic Rallies As Major US Banks Pledge Assistance To Calm Markets

First Republic Bank FRC may get a substantial capital injection or perhaps a full acquisition from a consortium of large financial institutions, including JP Morgan Chase & Co. JPM, Morgan Stanley MS, Citigroup C, Bank of America BAC and Wells Fargo WFC.

The agreement could be reached as early as Thursday, according to the Wall Street Journal, which cited people familiar with the matter.

The deposit influx in First Republic Bank from the group of large banks is reportedly worth around $20 billion.

First Republic came under scrutiny after Silicon Valley Bank's SIVB failure a week ago triggered worries over other regional banks with significant uninsured deposits.

Market reactions: Banking stocks rally as crisis recedes 

FRC shares fell 32% to $21.88 at the open, before attempting a strong rebound to $34, posting a 7% daily gain.

First Republic Bank (FRC) 5-min timeframe chart on Mar 16, 2023 – Chart: TradingView

Most S&P 500 financial stocks were in the green today, with MS, JPM, Wells Fargo and BAC up 3.3%, 2.5%, 2.8% and 3.3% respectively.  

Credit Suisse Group AG CS also rose almost 5% after the Swiss National Bank provided liquidity support to address the crisis.

S&P 500 Financial stocks: Daily performance on Mar 15, 2023 – Chart: TradingView
Among smaller names, Western Alliance Bancorporation WAL is up 17% on the day, and Pacwest Bancorp PACW rose 9%.

After dropping as much as 30% since the start Silicon Valley Bank crisis of last week, the SPDR S&P Regional Banking ETF KRE surged 4.8%.

Is a Full Deposit Guarantee on The Table? 

“Time is running short before the fire becomes a conflagration” and the “failure to provide a temporary guarantee on all deposits is causing an unnecessary banking crisis”, CEO Pershing Square Capital Management Bill Ackman said on Twitter today.

Treasury Secretary Janet Yellen on Thursday told senators the U.S. banking system is sound despite the turmoil, following the government's moves last weekend to backstop depositors from troubled institutions.  

"Americans can feel confident that their deposits will be there when they need them" Yellen told the Senate Finance Committee.

When questioned about whether people should expect that deposit protection is limitless in light of the government's actions over the weekend, Yellen reaffirmed the $250,000 cap.

Next: Cramer: Goldman Sachs 'Knew Nothing About Low End,' Time To 'Play Offense' And Buy First Republic

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