First Republic Bank got rescue package by US banks

First Republic Bank got rescue package by US banks

First Republic Bank | Biggest banking players in USA are coming together and raised around $30 billion rescue package for First Republic Bank so that the chain of failing the third California based banks can be break.

Stock price of First Republic Bank:

The Share price of First Republic Bank tumbled from around $120 to under $18, inside two weeks in the fear of whether the situation will going to be the same as that of Silicon Valley Bank or Signature Bank.

First Republic Bank got rescue package by US banks
First Republic Bank got rescue package by US banks

Investors have been seeking around for any hint of weak news regarding banks financials. Announcement of US regulators emergency support measures for all banks to prevent any more of them from failing are not even bothering investors and depositors.

That is why First Republic shares kept tanking. As a result, 2 ratings firms cut the bank’s credit rating to junk status. They commented that the stock volatility and increased media attention may affect more customers to go and withdraw all their funds, in the same way that happened with SVB and eventually it suffered a run out on deposit.

But we can see the 2 lenders different. The bank is situated in San Francisco which is around 30 miles north of the Silicon Valley. That distance shows that the bank is less exposed to the tech start up world.

First Republic has $10 billion of loan outstanding to private equity and venture capital funds. That is equivalent to one-quarter of SVB’s balance. First Republic also has $99 billion of mortgages on its books, versus SVB’s $9 billion.

Of course we cannot ignore that, the bank has also extended a mortgage to Mark Zuckerberg, at a 1.05% rate. And consumer accounts make up more than a third of First Republic’s deposit base.

And that’s important because consumer accounts generally fall within the FDIC’s insured limit of $250,000. To conclude, the perception created in the investors and depositors that the bank was in deep trouble was enough to turn that into reality.

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