First Republic Bank posts highest decline in market value in Mar, Credit Suisse sees 72% drop amid banks turmoil
3 min read 30 Mar 2023, 07:24 PM ISTThe US banks were the hardest hit after SVB and Signature Bank became the second and third largest banks failure in the country since the 2008 financial crisis.
PremiumNew York-based First Republic Bank, catering to high-net-worth individuals, suffered the most amidst the banking systems turmoil which sparked after two banks failed in the US. Among the top 20 market value losers in North America and Europe, First Republic topped the chart with a decline of 89.9% between March 1st to 24th. Credit Suisse followed closely at the third spot with a drop of nearly 72% in market value. Major crypto lender Silvergate Capital Corp held the second spot with a decline of over 87% in market value.
As per Global Data, a leading data and analytics company, First Republic experienced a staggering loss of $20.1 billion in a span of just 24 days, from 1 March to 24 March 2023. This financial setback has resulted in a drop in the bank’s market value to a mere $2.2 billion.
Further, as per the data, Silvergate Capital Corp's market value dropped by 87.3% to $54.5 million as of March 24 compared to $428.3 million as of March 1st. Swiss lender Credit Suisse followed with a decline of 71.7% to $3.32 billion market value from $11.73 billion.
Los Angeles-headquartered PacWest Bancorp recorded a drop of 65.9% in market value and failed Silicon Valley Bank's parent Silicon Financial Group saw a 62.5% dip.
Murthy Grandhi, Company Profiles Analyst at GlobalData, said, “The European banks withstood the meltdown in banking stocks fairly better following the news of the liquidation of Silvergate Bank on 8 March 2023, sanctions on Silicon Valley Bank (SVB) on 10 March 2023, and the closure of Signature Bank on 12 March 2023"
The US banks were the hardest hit after SVB and Signature Bank became the second and third largest banks failure in the country since the 2008 financial crisis.
Out of the top 20 banking stocks that lost their market value, 18 banks were from the US. The stock of First Republic Bank has dropped nearly 90% over the four weeks of March because of the bank accounting for large amounts of uninsured deposits exceeding the $250,000 FDIC limit, and subsequent high-volume withdrawals, the data said.
To restore investors' confidence in the banking system and the economy, First Republic received a liquidity lifeline of $30 billion as uninsured deposits from major American lenders such as 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.
The support from America’s largest banks was to show confidence in First Republic and its ability to continue to provide unwavering exceptional service to its clients and communities.
Similar was the case with Credit Suisse. The Swiss regulators led UBS and Credit Suisse in a merger agreement where the former will buy the embattled bank for CHF 3 billion. This mega deal was to restore the lost confidence in the Swiss economy and banking sector due to contagion fear. Also, the Swiss National Bank gave a liquidity boost to Credit Suisse by allowing the latter to borrow up to CHF 50 billion.
In regards to Credit Suisse, Global Data said, it lost nearly 72% of its market value after the news that Saudi National Bank, the bank’s major shareholder, was unwilling to invest more due to regulatory rules. This ultimately resulted in its announced merger with UBS AG.
For PacWest Bancorp's market drop, the data said it was due to the extensive media coverage of the regional banking crisis.
PacWest also borrowed $10.5 billion from the discount window of the Federal Reserve, $3.5 billion from the Federal Home Loan Bank, and $2.1 billion from the Bank Term Funding Program. This program was established by the Federal Reserve in response to the collapse of Signature Bank and SVB. This was also done to strengthen liquidity as well.
Global Data's Gandhi concluded that investors will witness a few more potential banking contagions because of the current dominance of emotion and sentiment in the banking sector. Deutsche Bank is in the spotlight due to spillover concerns, which led to a 200 bps increase in credit default swaps, the highest level since 2019.
