daily economic news
2023-04-30 09:17:59
Edited by Du Yu
According to CCTV news on April 30, less than two months have passed since the stock price plummeted in March, and now the First Republic Bank of the United States is once again facing a life-and-death crisis. Some analysts pointed out that due to factors such as the Fed’s aggressive interest rate hike policy, many small and medium-sized regional banks in the United States are facing a similar predicament as First Republic Bank.
After the closure of Silicon Valley Bank and Signature Bank in March, First Republic Bank was also facing a more serious run risk. In order to prevent it from becoming the next U.S. regional bank to fall, 11 large U.S. banks injected 300 million dollars into it. One hundred million U.S. dollars. However, this round of blood transfusion did not really bring it back on track. According to the latest first quarter results of this year released by First Republic Bank,This bank lost more than $100 billion in deposits in the first quarterwhich was worse than market expectations.
Affected by this, First Republic Bank’s stock price plummeted again by 43% at the close of trading on the 28th. Shares of First Republic have fallen 97% this year.
According to First Financial News, foreign media reported that,JPMorgan Chase, Bank of America and others are considering bidding for First Republic Bank.
It is understood that once the First Republic Bank is taken over, the US Federal Deposit Insurance Corporation will insure each depositor with a maximum amount of US$250,000, and uninsured deposits cannot be guaranteed full compensation. At present, according to the data disclosed by the bank, a large number of First Republic Bank’s deposits exceed the upper limit of the insurance amount. As of the end of March, the bank’s uninsured deposits accounted for 70%.Market participants say First Republic is doomed to run。
In the first quarter, the loss of deposits exceeded 100 billion U.S. dollars
On March 10 this year, Silicon Valley Bank, which mainly financed start-ups, “collapsed” due to a run on depositors and was unable to raise funds in time. Signature Bank was also shut down two days later. The successive closures of two U.S. banks caused turmoil in the U.S. financial system, and the First Republic Bank once faced the risk of a run.
Since then, 11 large U.S. banks have injected $30 billion in deposits into First Republic Bank in an attempt to instill confidence and prevent the spread of bank runs, but First Republic’s deposits have still lost significantly.
Image source: Xinhua News Agency
On April 24, First Republic Bank announced its performance report stating that the bank’s overall performance in the first quarter of this year has deteriorated significantly. As of the end of the first quarter, the total deposits of First Republic Bank were US$104.5 billion, a decrease of US$71.96 billion and US$57.59 billion from the previous quarter and a year-on-year decrease of 40.8% and 35.5% respectively. Excluding the US$30 billion deposited in the bank by 11 major banks including JP Morgan Chase, the bank actually lost US$102 billion in deposits from the previous month.
With a large outflow of deposits, First Republic Bank’s net interest margin is also shrinking rapidly, from 2.5% in the fourth quarter of 2022 to 1.8% in the first quarter of 2023. According to estimates by The Economist in the report, the bank’s net interest in March may have been almost zero, that is, the funds paid by the bank for financing and the income it received from loans basically offset each other.
According to a CCTV News report earlier on the 28th, Reuters reported on April 28 local time, citing people familiar with the matter, that U.S. officials were coordinating and negotiating urgently to continue bailing out the First Republic Bank.
According to reports, government agencies such as the Federal Deposit Insurance Corporation, the Treasury Department and the Federal Reserve Board have recently begun arranging meetings with a number of financial institutions to discuss “giving a helping hand” to the troubled First Republic Bank.
The U.S. government is trying to coordinate more parties to participate in rescue negotiations, including banks and private equity investment institutions.
“We are discussing a number of strategic options with various parties while continuing to serve our customers,” First Republic Bank said in a statement.
First Republic Bank of America Coordinated Emergency Response
According to news from Xinhua News Agency on April 29, and according to Reuters on the 28th, citing sources familiar with the matter,U.S. officials are urgently coordinating consultations on continuing to bail out First Republic Bank.
According to reports, government agencies such as the Federal Deposit Insurance Corporation, the Treasury Department and the Federal Reserve Board have recently begun arranging meetings with a number of financial institutions to discuss “giving a helping hand” to the troubled First Republic Bank.
The U.S. government is trying to coordinate more parties to participate in rescue negotiations, including banks and private equity investment institutions.
The U.S. government prefers to strike a bailout deal in the private sector rather than letting the FDIC take over First Republic, people familiar with the matter said. It is unclear whether the U.S. government is considering joining the private sector bailout. The bank’s management is trying to reach a deal to avoid a takeover by U.S. regulators.
“We are discussing a number of strategic options with various parties while continuing to serve our customers,” First Republic Bank said in a statement.
Relevant rescue proposals include selling assets, or setting up “bad banks” to isolate their non-performing loan assets. “Bad banks” are not banks and operate like private funds. The main task of “bad banks” is to isolate bad assets from healthy assets.
However, many parties have not yet reached an agreement on the final rescue plan.
Many small and medium banks in the United States face survival challenges
Affected by factors such as the Fed’s aggressive interest rate hike, in addition to the First Republic Bank,Many other small and medium-sized U.S. regional banks are also facing survival challenges. Moody’s, an international rating agency, recently downgraded the ratings of more than 10 U.S. regional banks, including U.S. Bank of America and Bank of Hawaii.Moody’s said that the pressure on banks to manage assets and liabilities is becoming more and more obvious, and it is doubtful whether some banks’ deposits have high stability.
Image source: CCTV News
The Wall Street Journal reported that Moody’s latest research shows that the U.S. banking industry is suffering from bank closures, high inflation and the Fed’s aggressive interest rate hikes, and the financial system is in a fragile state. According to data released by the Federal Reserve, in the week ended April 12, all U.S. commercial bank deposits fell to $17.38 trillion from $17.43 trillion a week earlier. The outside world is worried that if the First Republic crisis triggers another wave of runs, it may affect more regional banks in the United States.
Image source: CCTV News
Gerald, deputy director of the American University Washington School of Law:No acquirer wants to buy a dead bank in receivership. That’s why there will continue to be a massive outflow of uninsured deposits, basically a bit of an epidemic where one bank will cause another to go down and there will be runs, especially on banks that have a lot of uninsured deposits.
Bob Michel, Chief Investment Officer, JPMorgan Asset Management:It would be naïve to say that this crisis only affects the First Republic Bank. This crisis is in the most highly capitalized industry in the world – banking, and the regional banking system is vital to the United States.
Some financial experts from American universities believe that, judging from the stock price performance of First Republic Bank,The US banking crisis is still brewing. For some time to come, the U.S. banking industry may undergo large-scale restructuring, and large banks may acquire many small and medium-sized banks that cannot survive. The analysis pointed out that as a large amount of funds flowed into money market funds due to risk aversion and pursuit of relatively high returns, the reserves of many small and medium-sized banks were eroded. The shrinking credit and the improvement of credit standards will further shrink the US money supply and increase the US economy. risk of landing.
Daily Economic News Comprehensive CCTV News, Xinhua News Agency, China Business News, Jingjing.com
Cover image source: Xinhua News Agency