First Republic (FRC) shares tumbled anew on Monday after Standard and Poor's cut its credit rating on the troubled lender, even as the broader market stabilized from last week's chaos and UBS Group (UBS) absorbed ailing Credit Suisse (CS).
- S&P downgrades First Republic Bank due to 'liquidity stress' and outflows.
- Stocks higher despite a rollercoaster start as UBS absorbs rival Swiss bank Credit Suisse.
- The Federal Reserve announced coordinated action on U.S. dollar liquidity.
S&P Says $30 Billion Injection ‘May Not Solve’ Woes
First Republic, whose stock fetched more than $100 earlier this month, lost almost a quarter of its market value, extending its slide from last week to about $17 by 1:30 p.m. New York time. The San Francisco-based bank secured a $30bn liquidity commitment from some of the largest U.S. banks last week, including JP Morgan Chase Inc. (JPM) and Bank of America (BAC).
S&P said the lifeline "may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing." S&P downgraded the bank to junk status last week and slashed it again by three notches to "B-plus," citing “high liquidity stress” and “substantial outflows." First Republic is also reportedly exploring strategic options, including a share sale.
Other regional banks rebounded. PacWest Bancorp (PACW) jumped more than 18% and Zions Bancorp (ZION) rose almost 5%. In other bank-rescue news, New York Community Bancorp's (NYCB) Flagstar Bank will buy New York's Signature Bank (SBNY), the Federal Deposit Insurance Corporation (FDIC) said Sunday.
UBS Absorbs Credit Suisse for $3.2bn, Central Banks Act
The big news in Europe over the weekend was the conclusion of a rushed deal for the struggling Swiss lending giant Credit Suisse. Rival Swiss firm UBS agreed to acquire the bank for $3.2 billion and will receive 9 billion CHF ($9.72 billion) from the Swiss National Bank (SNB) to "assume potential losses arising from certain assets," while another 100 billion CHF ($108 billion) credit line will be offered by the SNB. The deal and rattled European bond markets after regulators said the deal would include a "complete write-down" of all AT1 debt worth around CHF 16 billion to increase capital.
Meanwhile, the Federal Reserve announced "coordinated action" on Sunday from the world's largest central banks to enhance dollar swap credit lines. "To improve the swap lines' effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily," the Fed said.
Senator Elizabeth Warren rewed her attack on Fed Chair Jerome Powell in an interview with CNBC. Warren said Powell had "failed" at monetary policy and regulation and shouldn't be in his role.