San Francisco: Big US banks pumped $30 billion into deposits First Republic Bank On Thursday, the lender swooped to the rescue in a wider crisis triggered by the collapse of two other mid-sized US lenders during the past week.
Banking stocks globally have declined since then Silicon Valley Bank Bonds collapsed last week due to losses that spiked last year as interest rates soared, raising questions about what else might be lurking in the wider banking system.
Within days, the market turmoil had engulfed Swiss lender Credit Suisse, forcing it to borrow up to $54 billion from Switzerland’s central bank to shore up liquidity.
By Thursday afternoon, the spotlight had turned back to the United States as big banks attempted to shore up support for First Republic, a regional lender whose shares had plunged 70% in the past nine trading sessions.
Some of the biggest US banking names were involved in the rescue, including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp, Wells Fargo & Co, Goldman Sachs and Morgan Stanley, according to a statement from the banks.
The deal was put together by power brokers including US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and JPMorgan Chase CEO Jamie Dimon, who discussed the package on Tuesday, according to a source familiar with the situation.
US regulators said the show of support was most welcome, and reflected the resilience of the banking system.
On Sunday, a round of financing raised through JP Morgan gave First Republic $70 billion in funding. But it failed to calm investors as concerns of a contagion deepen after Signature Bank’s demise svb And depositors started moving cash to larger lenders.
First Republic Bank stock closed up 10% on the news of the rescue, but its shares fell 18% in after-market trading after the bank said it would suspend its dividend.
The bank’s share price is down more than 70% since March 6.
News of the rescue helped propel Wall Street indexes with JPMorgan, Morgan Stanley and Bank of America rising more than 1% each, while the benchmark S&P 500 Bank Index recovered 2.2%.
Smaller banks also bounced back from the recent selloff, with Fifth Third Bancorp, PNC Financial Services Group and KeyCorp each gaining more than 4%.
emergency liquidity
Earlier in the day, Credit Suisse became the first major global bank to take an emergency lifeline since the 2008 financial crisis, as fears of a contagion gripped the banking sector and raised doubts over whether central banks could afford aggressive interest rates. Will be able to control the increase in or not. In inflation.
Rapidly rising interest rates have made it difficult for some businesses to repay loans or service debt, increasing the potential for losses for lenders already worried about a recession.
However, the European Central Bank raised interest rates by 50 basis points on Thursday as flagged, stressing the resilience of the euro area’s banking sector and assuring it would be ready to offer liquidity support if needed. There are many tools for this.
The US Federal Reserve is expected to follow the ECB’s move at its next meeting with a quarter-point interest rate hike, derailed by banking sector turmoil days earlier.
Policymakers have tried to emphasize that the current turmoil is different from the global financial crisis 15 years ago because banks are better capitalized and funds are more readily available.
But central bank data on Thursday also showed banks sought a record amount of emergency liquidity from the Federal Reserve in recent days, boosting the size of the Fed’s balance sheet after months of contraction.
“The numbers, as we see them here, are more consistent with the idea that this is a idiosyncratic issue at a handful of banks,” said Thomas Simmons, money market economist at investment bank Jefferies.
Yellen said the US banking system remains strong thanks to “decisive and forceful” actions following the collapse of the Silicon Valley bank.
Allianz, one of Europe’s largest financial firms, said authorities were “well equipped” to deal with any liquidity crisis, “unlike what happened during the 2007-2008 financial crisis”.
time to buy
Credit Suisse, a bank with a 167-year history, became the biggest European name to be swept up in turmoil after its biggest investor said it could not provide more funding because of regulatory hurdles.
It said it would exercise an option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank, which it confirmed would provide liquidity to the bank against adequate collateral.
Shares of Credit Suisse closed 19% higher on Thursday, recovering some of their 25% drop on Wednesday. Refinitiv data shows European banks have lost about $165 billion in market value since March 8, before last week’s collapse of the SVB.
The stock market value of Switzerland’s second largest bank has fallen by 90% from a high of about $91 billion in February 2007 to about $8.66 billion after a long decline in its shares.
Analysts said the measures would buy time for Credit Suisse to carry out a planned restructuring and possibly further steps to turn the Swiss lender around.
Banking stocks globally have declined since then Silicon Valley Bank Bonds collapsed last week due to losses that spiked last year as interest rates soared, raising questions about what else might be lurking in the wider banking system.
Within days, the market turmoil had engulfed Swiss lender Credit Suisse, forcing it to borrow up to $54 billion from Switzerland’s central bank to shore up liquidity.
By Thursday afternoon, the spotlight had turned back to the United States as big banks attempted to shore up support for First Republic, a regional lender whose shares had plunged 70% in the past nine trading sessions.
Some of the biggest US banking names were involved in the rescue, including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp, Wells Fargo & Co, Goldman Sachs and Morgan Stanley, according to a statement from the banks.
The deal was put together by power brokers including US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and JPMorgan Chase CEO Jamie Dimon, who discussed the package on Tuesday, according to a source familiar with the situation.
US regulators said the show of support was most welcome, and reflected the resilience of the banking system.
On Sunday, a round of financing raised through JP Morgan gave First Republic $70 billion in funding. But it failed to calm investors as concerns of a contagion deepen after Signature Bank’s demise svb And depositors started moving cash to larger lenders.
First Republic Bank stock closed up 10% on the news of the rescue, but its shares fell 18% in after-market trading after the bank said it would suspend its dividend.
The bank’s share price is down more than 70% since March 6.
News of the rescue helped propel Wall Street indexes with JPMorgan, Morgan Stanley and Bank of America rising more than 1% each, while the benchmark S&P 500 Bank Index recovered 2.2%.
Smaller banks also bounced back from the recent selloff, with Fifth Third Bancorp, PNC Financial Services Group and KeyCorp each gaining more than 4%.
emergency liquidity
Earlier in the day, Credit Suisse became the first major global bank to take an emergency lifeline since the 2008 financial crisis, as fears of a contagion gripped the banking sector and raised doubts over whether central banks could afford aggressive interest rates. Will be able to control the increase in or not. In inflation.
Rapidly rising interest rates have made it difficult for some businesses to repay loans or service debt, increasing the potential for losses for lenders already worried about a recession.
However, the European Central Bank raised interest rates by 50 basis points on Thursday as flagged, stressing the resilience of the euro area’s banking sector and assuring it would be ready to offer liquidity support if needed. There are many tools for this.
The US Federal Reserve is expected to follow the ECB’s move at its next meeting with a quarter-point interest rate hike, derailed by banking sector turmoil days earlier.
Policymakers have tried to emphasize that the current turmoil is different from the global financial crisis 15 years ago because banks are better capitalized and funds are more readily available.
But central bank data on Thursday also showed banks sought a record amount of emergency liquidity from the Federal Reserve in recent days, boosting the size of the Fed’s balance sheet after months of contraction.
“The numbers, as we see them here, are more consistent with the idea that this is a idiosyncratic issue at a handful of banks,” said Thomas Simmons, money market economist at investment bank Jefferies.
Yellen said the US banking system remains strong thanks to “decisive and forceful” actions following the collapse of the Silicon Valley bank.
Allianz, one of Europe’s largest financial firms, said authorities were “well equipped” to deal with any liquidity crisis, “unlike what happened during the 2007-2008 financial crisis”.
time to buy
Credit Suisse, a bank with a 167-year history, became the biggest European name to be swept up in turmoil after its biggest investor said it could not provide more funding because of regulatory hurdles.
It said it would exercise an option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank, which it confirmed would provide liquidity to the bank against adequate collateral.
Shares of Credit Suisse closed 19% higher on Thursday, recovering some of their 25% drop on Wednesday. Refinitiv data shows European banks have lost about $165 billion in market value since March 8, before last week’s collapse of the SVB.
The stock market value of Switzerland’s second largest bank has fallen by 90% from a high of about $91 billion in February 2007 to about $8.66 billion after a long decline in its shares.
Analysts said the measures would buy time for Credit Suisse to carry out a planned restructuring and possibly further steps to turn the Swiss lender around.
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