Good news for First Republic Bank and their investors
First Republic Bank, in addition to the liquidity aid from the Federal Reserve and JP Morgan Chase, has received help from 10 other banks in the form of uninsured deposits. There are three tiers of uninsured depositors: $5 billion, $2.5 billion, and $1 billion. These banks are among the biggest names in the industry, with JP Morgan Chase, Wells Fargo, Citigroup and Bank of America being included in the highest deposit tier. This announcement was issued by First Republic Bank, as well as other involved banks such as Citigroup, via press releases:
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion. This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities. Regional, midsize and small banks are critical to the health and functioning of our financial system.Source: Citigroup’s Official Press Release
First Republic’s Founder and Executive Chairman Jim Herbert, and its CEO and President Mike Roffler issued a joint statement in their press release:
“We would like to share our deep appreciation for Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank. Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system. In addition, we want to share our sincerest thanks to our colleagues, clients, and communities for their continued and overwhelming support during this period.”Source: First Republic Bank’s Official Press Release
In the same press release, First Republic explained their rationale for suspending the stock dividend:
The Bank is focused on reducing its borrowings and evaluating the composition and size of its balance sheet going forward. Consistent with this focus and during this period of recovery, the Bank’s Board of Directors has determined to suspend its common stock dividend.Source: First Republic Bank’s Official Press Release
Furthermore, information on the other sources of liquidity, such as loans from the Federal Home Loan Bank, and a range for the amount borrowed from the Federal Reserve were revealed:
As previously announced, First Republic (the “Bank”) obtained additional liquidity through additional borrowing capacity. It has since drawn on this borrowing capacity following recent industry events.
Source: First Republic Bank’s Official Press Release
- As of March 15, 2023, the Bank had a cash position of approximately $34 billion, not including the $30 billion of uninsured deposits from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bankwith an initial term of 120 days at market rates.
- From March 10 to March 15, 2023, Bank borrowings from the Federal Reserve varied from $20 billion to $109 billion at an overnight rate of 4.75%.
- Since close of business on March 9, 2023, the Bank has also increased short-term borrowings from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
Upon news of this information, First Republic Bank’s stock had a slight spike at $40 per share, in comparison the stock sank in the early hours of trading to a low of $19.80 a share due to multiple factors, including First Republic’s credit downgrade by S&P Global Ratings and Fitch Ratings, Moody’s putting it under review, the suspension of its dividend, rumors of a potential sale, as well as reports of executives selling $12 million in stock in the months preceding the crisis. First Republic stock closed at $34.27.
First Republic Bank press release: click here
Citigroup press release: click here