First Republic Bank’s shares soared more than 20% in Tuesday’s pre-market trading, leading a rally in regional bank shares. The surge comes after a recent speech by Treasury Secretary Janet Yellen, in which she indicated that the government could backstop deposits at more banks if there was a risk of contagion. Investors had been worried about a large outflow of deposits from regional banks since the failures of Silicon Valley Bank and Signature Bank, which resulted in regulators guaranteeing their deposits after they were closed.
First Republic Bank had been considered one of the remaining regional banks most at risk of a similar fate as SVB due to the large percentage of uninsured deposits it had as of the end of Q4 2022. The bank had seen a 90% plunge in its shares so far in March and had hit a record low on Monday. However, JPMorgan led a group of 11 banks last week that deposited a combined $30 billion into First Republic Bank, which helped the bank manage short-term deposit activity. Despite the deposit, the bank’s stock continued to decline, prompting JPMorgan to give advice on alternatives to the San Francisco bank, which included a capital raise or possibly even a sale.
The recent surge in First Republic’s shares is also driven by investors’ hopes for some sort of strategic action by the bank or another big regulatory move to stem the downward spiral in the sector. The SPDR S&P Regional Banking ETF also gained 4.5% in early trading, following a 29% slide in March so far.
