First Republic loses 65% of its value on the stock market and leads the collapse of bank shares despite government support for SVB

By Jesse Pound and John Melloy -

First Republic Bank led the fall in bank shares across the markets on Monday, which was industry-wide despite extraordinary steps taken Sunday night by federal regulators to support all Silicon Valley financial institution depositors. Bank (SVB) and Signature Bank and offer additional financing to other troubled institutions.

Shares of San Francisco's First Republic fell as much as 65%, adding to 33% last week.

PacWest Bancorp was down 32%, and Western Alliance Bancorp lost more than 50%, marking a sharp drop especially for regional banks.

Zions Bancorporation lost 19%, and KeyCorp fell 23%.

Bank of America was down 3%, and Charles Schwab plunged 9%.

And the price of various entities was repeatedly stopped throughout the day on Wall Street due to its extreme volatility.

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The declines came despite the Federal Reserve creating a new Bank Term Financing Program that will offer loans of up to a year to banks in exchange for high-quality collateral such as Treasury bonds.

In addition, the Federal Reserve eased the conditions of its discount window.

First Republic said on Sunday that it had received additional liquidity from the Federal Reserve and JPMorgan Chase.

The bank said the move brings its unused liquidity to $70 billion, before the funding it could get from new contributions.

"First Republic's capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks," founder Jim Herbert and CEO Mike Roffler said in a statement. .

On Monday, Herbert told CNBC that the bank was operating as usual and is not seeing many deposit withdrawals.

Western Alliance said for its part that it registers “moderate” withdrawals.

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The slide in regional bank shares came after a spate of withdrawals from SVB prompted federal intervention to close the bank on Friday, amid concerns over the high percentage of uninsured deposits.

There are other midsize banks that could risk going the same way if there are large deposit withdrawals.

"We believe that regional banks whose uninsured deposit bases are less diversified and large are at risk of deposit flight, but not at the speed of SVB, and should have time to turn to wholesale funding markets (such as FHLB ) and increasing cash levels. In a fragile environment such as the one we find ourselves in, we believe banks should be wary of the potential negative effects of raising deposit rates to maintain deposits," said Keith Horowitz, an analyst at Citi , in a statement sent to its clients.

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SVB was the biggest US bank failure since 2008, with $212 billion in assets.

First Republic declared about $213 billion in assets on December 31, according to a securities statement.

Although First Republic is not as technology-focused as SVB, the bank tended to cater to businesses and wealthy individuals who have large uninsured deposits.

"Unfortunately, one of the first consequences of the SVB bankruptcy is that it could lead to a flight of uninsured deposits from smaller and less diverse banks to larger and more diverse ones," said Chris Kotowski, an analyst at Oppenheimer.