First Republic shares jump as regional banks rebound from Monday’s sell-off

First Republic shares jump as regional banks rebound from Monday’s sell-off

A branch of First Republic Bank in New York, United States, on Friday March 10, 2023.

jeenah moon | Bloomberg | Getty Images

shares of First Republic were sharply higher on Tuesday as concerns about the state of the regional bank seemed to be easing after a day of selling.

The stock was up 25% during the session and was one of the best-performing stocks of the year SPDR S&P Regional Banking ETF (KRE) – which increased by more than 2%. PacWest was another major climber, up over 30%.

Karl Schwab also rallied, up about 11% after falling almost 12% on Monday.

The moves come after regional banks fell sharply on Monday, even after US regulators took extraordinary measures to support all depositors in the now-failing Silicon Valley bank. The KRE suffered its biggest one-day loss since March 2020, falling 12.3%.

First Republic led Monday, down 61.8%. Chief Executive Jim Herbert told CNBC’s Jim Cramer that the bank is not seeing any major outflows and is operating as usual. The bank also announced on Sunday that it had received additional liquidity from JPMorgan and the Federal Reserve.

Upbeat statements from financial managers appeared to support Tuesday’s rally. Walt Bettinger, CEO of Charles Schwab, told CNBC’s The Exchange that the company is seeing inflows in “significant numbers.” Meanwhile, KeyCorp CEO Chris Gorman said Tuesday on CNBC’s “Squawk on the Street” that his bank hadn’t seen any significant outflows of deposits in recent days and was indeed receiving cash inflows from retail customers.

However, shares of First Republic fell from daily highs after S&P Global took a hit on the bank’s credit rating, citing volatile deposit flows adversely affecting it.

A few other regional bank stocks, including Western Alliance and KeyCorp, shed most of their daily losses but were still positive. Zions Bancorp gave up all of its gains and turned negative during the session.

In addition to securing deposits at SVB and Signature Bank, which was closed on Sunday, federal regulators also announced efforts on Sunday to stabilize the broader banking system. One of these is the Fed’s Bank Term Funding Program, which allows banks to swap certain high-value assets for cash without incurring mark-to-market losses.

And while Monday’s declines in regional bank stocks showed that many investors were unconvinced that regulators’ actions would be enough to stem further bank runs, according to Raymond James analyst Daniel, there appears to have been no widespread withdrawals from banks in recent days Banks to have given Tamayo.

“Outflows have not accelerated in recent days and indeed some banks have seen net inflows as SVB and Signature Bank deposits have moved,” Tamayo said in a note to clients.

The rally continued despite Moody’s Investors Service downgrading its view on the US banking system to negative from stable.

Correction: The Fed announced the Bank Term Funding Program on Sunday. A previous version specified the name of the program incorrectly.