First Republic and Credit Suisse stocks plummet despite fresh capital

Shares in First Republic Bank and Credit Suisse tumbled on Friday, a sign investors remain wary of the struggling banking sector despite public and private measures to stabilize the sector.

The fall in banks’ stocks continued the downward trend that was interrupted on Thursday when both First Republic and Credit Received received emergency financing commitments to shore up their struggling finances. Shares in First Republic Bank plunged 33% on Friday to close at $23.03, while Credit Suisse fell 7% to end the day at $2.01.

The declines come after First Republic shares rose on Thursday, while Credit Suisse shares were flat in a short-lived respite amid mounting concerns about the industry following the sudden collapse of Silicon Valley Bank and Signature Bank last week week reflects.

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A consortium of 11 major financial institutions on Thursday pledged to provide $30 billion to First Republic Bank and the Swiss central bank agreed to provide nearly $54 billion to Credit Suisse.

First Republic had $176 billion in deposits in December

“In our view, this reinforces fears that other regional banks may experience deposit outflows, although we would expect outflows to be much smaller,” CFRA Research analyst Alexander Yokum wrote in a note on Friday.

Meanwhile, the Swiss National Bank’s move to recapitalize Credit Suisse hasn’t allayed concerns about its finances. The capital injection is unlikely to solve Credit Suisse’s main problem, which is that it hasn’t been profitable for two years, analysts at Capital Economics said.

Although Credit Suisse has a plan to revitalize its business over a three-year period, “it is uncertain whether markets will last that long,” Andrew Kenningham, chief economist for Europe at Capital Economics, said in an investor note on Friday.

The former parent company of Silicon Valley Bank files for bankruptcy

Shares in San Francisco-based First Republic plummeted after California regulators seized Silicon Valley Bank on March 10. Like Silicon Valley Bank, a significant portion of First Republic’s deposits are uninsured, making them more vulnerable to withdrawals from shy customers. The bank has $212 billion in assets under management and employs approximately 7,200 people.

With questions about First Republic’s financial stability, its share price has plummeted, losing 81% of its value since the beginning of the month.

Meanwhile, Credit Suisse’s troubles began well before the collapse of Silicon Valley Bank. It caused $8 billion in net losses last year — the largest the company has ever recorded.

Credit Suisse is “a major threat to the global economy,” in part because it has subsidiaries outside of Switzerland and handles hedge fund trading, Kenningham said.

Shares of other regional banks, including KeyCorp, Pacific West, Western Alliance and Zions, fell between 7% and 11% on Friday, but those banks weren’t promised billions of dollars in aid like Credit Suisse and First Republic.

Banking Crisis & Response

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