Big banks come to rescue of First Republic Bank

Citigroup, Goldman Sachs and nine other large banks said Thursday they are sending a combined $30 billion to shore up First Republic Bank, a regional bank in California that raised concerns in the wake of the sudden collapse of Silicon Valley Bank. 

Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they plan to contribute $5 billion each, while Goldman Sachs and Morgan Stanley will each chip in $2.5 billion. BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank are adding $1 billion each. 

In a joint statement Thursday, the banks said that their cash infusion shows “confidence in First Republic and in banks of all sizes.”

Federal regulators from agencies including the U.S. Treasury Department and the Federal Deposit Insurance Corporation said in a statement Thursday that the “show of support by a group of large banks is most welcome.” 

They added that it “demonstrates the resilience of the banking system.”

First Republic Bank saw its share price go through a wild ride this week, sinking as much as 36% in early trading Thursday before closing the day up 10%. Moody’s downgraded First Republic’s credit rating this week, noting that the bank is “more sensitive to rapid and large withdrawals from depositors” than its peers. First Republic has also seen its market value shrink from more than $22 billion in January to less than $7 billion so far. 

As with Silicon Valley Bank, a significant share of First Republic’s deposits are uninsured, which makes it more prone to withdrawals from skittish customers. 

First Republic’s new round of capital will be on top of the extra cash reserves First Republic said it added earlier this week from the Federal Reserve and JPMorgan Chase.

First Republic didn’t respond to a request for comment. First Republic, with $212 billion in assets under management, has about 7,200 employees.

CEO Mike Roffler said earlier this week that the bank has a “very strong” amount of capital, citing $70 billion available for operations. 

Pacific West, Zions, Western Alliance and other regional banks saw their stocks plummet this week after SVB’s sudden seizure by financial regulators spooked investors. Many of those stocks regained ground Tuesday after President Biden reassured Americans they can have confidence in the U.S. banking system, and regulators pledged that all deposits at SVB would be available to customers. 

Treasury Secretary Janet Yellen on Thursday sought to allay concerns about the stability of U.S. banks in an appearance before the Senate Finance Committee.

“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she told lawmakers. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remains strong and that depositors’ savings remain safe.”