First Republic Bank bonds, stock rally as big banks announce $30 billion pledge
By Joy Wiltermuth
Bond issued by First Republic Bank (FRC) were rallying on Thursday as details emerged of a $30 billion capital pledge to the California-based lender by America's biggest banks.
First Republic's 4.375% coupon bonds due August 2046 were pegged at a spread of 340 basis points over risk-free Treasurys, rallying about 122 basis points, according to MarketAxess.
On a yield basis, that's a roughly 7.2% yield and price of about 68 cents on the dollar, compared with a previous 8.2% yield and price of around 60 cents, signaling that investors are demanding less compensation to take on long-term risk related to First Republic. Still, bonds priced below 70 cents on the dollar are broadly considered distressed.
A group of America's largest banks, including JPMorgan Chase & Co., (JPM) Citigroup Inc. (C), Bank of America Corp. (BAC) and Wells Fargo & Co., (WFC) on Thursday afternoon announced plans to shore up First Republic with $30 billion of total uninsured deposits. Details of talks at the banks were earlier reported by The Wall Street Journal.
The move "reflects their confidence in First Republic and in banks of all sizes," the banks said in a joint statement. "It demonstrates their overall commitment to helping banks serve their customers and communities."
First Republic's stock also turned higher Thursday, rallying above its worst levels of the session, but still about 73% lower on the year, according to FactSet.
Investors have been concerned about regional banks since the collapse of Silicon Valley Bank (SIVB) and Signature Bank (SBNY), which raised concerns about pressures in the banking system as the Federal Reserve has sharply increased interest rates in the past year.
U.S. Treasury Secretary Janet Yellen told senators on Thursday that the U.S. banking system remains on solid footing, and that Americans can be confident about their deposits.
Credit Suisse (CSGN.EB) also triggered investor concerns this week after its shares in New York fell to about $2 on Wednesday. Shares rallied Thursday after the Swiss banking giant said it will tap its central bank for 50 billion francs ($54 billion) and launching an offer to buy beaten-up debt.
U.S. stocks were higher Thursday, with the Dow Jones Industrial Average up 350 points, or 1.1%, the S&P 500 index 1.7% higher and the Nasdaq Composite Index advancing 2.4%, at last check, according to FactSet.
Related: U.S. bank stocks turn green on report that Morgan Stanley and JPMorgan may help ailing First Republic raise capital
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March 16, 2023 15:59 ET (19:59 GMT)
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