First Republic Bank's share plunged about 60% in pre-market trading

First Republic bank had, on Sunday, assured that it had $70 billion in unused liquidity to fund operations
Sejal Sharma
First Republic Bank in Manhattan, New York.
First Republic Bank in Manhattan, New York.

Getty Images  

The embers from the catastrophic collapse of Silicon Valley Bank (SVB) are still being fanned.

In what seems like aftermath, San Francisco-based regional lender First Republic Bank's share plunged about 60 percent in pre-market trading on Monday.

The bank's shares fell 15 percent on Friday to $81.76 apiece. They slumped 65 percent in pre-market trade on Monday at 4.48 am. ET. The bank's stock is down 33 percent so far this year.

Damage control mode all weekend

On Sunday, in a bid to reassure investors and its customers, First Republic Bank said in a statement titled 'Capital and Liquidity Remain Very Strong' that the regional lender has further enhanced and diversified its financial position through access to additional liquidity from the Federal Reserve Bank and JPMorgan Chase & Co.

Jim Herbert, Founder and Executive Chairman, and Mike Roffler, CEO and President of First Republic Bank, said, "First Republic's capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks. As we have done since 1985, we operate with an emphasis on safety and stability at all times while maintaining a well-diversified deposit base. First Republic continues to fund loans, process transactions, and fully serve the needs of clients by delivering exceptional service."

The statement further said that this 'strengthens First Republic's existing liquidity profile. The total available, unused liquidity to fund operations is now more than $70 billion.'

The news of fresh financing acquired by the bank clearly failed to assure the investors, reflecting heightened investor anxiety following the collapse of the startup-friendly Silicon Valley Bank.

A trickle-down effect

In what is being called the largest bank failure since the 2008 financial crisis, U.S. regulators shut down SVB on Friday. Its collapse came as a big shock because it was deemed to be a stable lender among regional banks. Its downfall came about in a matter of days.

In a bid to revive confidence in the U.S. banking system, the U.S. authorities launched emergency measures over the weekend after the failure of SVB threatened to trigger a broader financial crisis. The nosedive in FRB's share is a testament to the continued angst felt by the investors, raising alarming concerns about the country's banking sector's health. 

It was earlier reported that there are several regional banks sitting on losses and are looking vulnerable. As pressure continues to mount on regional banks, this is an indication that the consequences of last week's financial crisis are far from over.

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