Several regional lenders have seen a decline in their shares on Monday following the collapse of First Republic Bank, which is the third major casualty of the biggest crisis to hit the banking sector in the United States since 2008.
The banking turmoil began with the closure of Silicon Valley Bank and Signature Bank in March, causing depositors to flee regional lenders and driving fears that the crisis could engulf other midsized banks.
The KBW Regional Banking Index hit a session low, shedding 2.7 percent on Monday, while shares of Citizens Financial Group, PNC Financial Services Group, Truist Financial Corp, and US Bancorp fell between 3 percent and 7 percent. Valley National Bankcorp, which owns Valley National Bank, lost more than 20 percent.
Earlier on Monday, a deal was announced that allows for an orderly failure of First Republic. Under the terms, JPMorgan Chase & Co will pay $10.6bn to the US Federal Deposit Insurance Corp (FDIC), which took First Republic into receivership, for most of the failed bank’s assets.
Shares of JPMorgan Chase rose 2.14 percent, making the largest US bank the top gainer on the Dow Jones. In the options market, traders were still being cautious on most regional banks, with the 30-day implied volatility on the S&P Regional Banking ETF — a measure of expected near-term price swings — dropping about 2 points on Monday from the previous week.
“This deal does not change the rates, recession, and regulatory headwinds that regional banks are facing,” said UBS analyst Erika Najarian, but added it is an elegant solution that should lay to rest outstanding investor concerns over liquidity.
2023-05-01 22:00:04 First Republic collapse sparks regional bank shares sell-off
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