Eleven major US banks have made a bold move to deposit a total of $30 billion into the troubled First Republic Bank.
Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo each made an uninsured deposit of $5 billion, while Goldman Sachs and Morgan Stanley each made a deposit of $2.5 billion. BNY-Mellon, PNC Bank, State Street, Truist, and U.S. Bank each made a deposit of $1 billion.
First Republic Bank has been facing a tumultuous month, with its stock price plummeting 74% from $115 to $35. The bank had $212 billion in total assets as of last year, but came under scrutiny following the collapse of the Silicon Valley Bank.
In its annual report, First Republic revealed that the fair-market value of its “real estate secured mortgages” was $117.5 billion as of Dec. 31, or $19.3 billion below their $136.8 billion balance-sheet value. The fair-value gap for that single asset category was larger than First Republic’s then $17.4 billion of total equity, with their stock market cap now standing at about $6 billion.
The decision by the eleven banks to deposit $30 billion into First Republic Bank has been applauded by the Federal Reserve Banks, as well as the Department of the Treasury, FDIC, and OCC.
In a joint statement, they said, “This show of support by a group of large banks is most welcome and demonstrates the resilience of the banking system.”
This is the first time in living memory that banks have taken such action, reminiscent of the actions of JP Morgan during the financial crisis of a century ago. While the situation remains uncertain, the move speaks to the extraordinary times that central banks and commercial banks find themselves in as they face huge losses from asset investments.