To the actions of regional financial institutions in the U.Sincluding the shaken First Republic Bankrose on Tuesday as fears of a broader banking crisis eased and investors turned their focus to the next move in the Federal Reservethe central bank of the United States.
The Fed’s relentless rate hikes to curb inflation were partly to blame for triggering the biggest meltdown in the banking sector since the 2008 financial crisis, and investors are divided over whether the US central bank will be forced to halt its bullish cycle. on Wednesday to ensure stability.
The tumultuous 10 days for banks that culminated in rival UBS’ takeover of Credit Suisse for CHF3 billion ($3.2 billion) were triggered by the collapse of Silicon Valley Bank (SVB), which sank under the weight of of bond-related losses due to an increase in interest rates last year.
“The banking industry’s near-death experience over the past two weeks is likely to make Fed officials more restrained in their stance on the pace of increases,” said Steve Englander, head of research for G10 FX at Standard Chartered.
Concerns about the health of midsize US banks persist, particularly First Republic Bank. But the Credit Suisse bailout appears to have allayed the worst fears of systemic contagion, boosting shares in European banks and other US regional banks.
After rising as much as 60% during Tuesday’s session, First Republic shares closed up 29.5%, recouping some of their deep losses over the past two weeks, while the biggest US banks also rallied. First Republic has lost 80% of its market cap this month, even after Tuesday’s rally.
The US Bancorp USB.N jumped nearly 9%, while the JPMorgan Chase, O CitigroupO Wells Fargo and the Bank of America rose more than 2%.
The bank index S&P 500 rose 3.6%, its biggest one-day gain since November.
First Republic is looking at ways to downsize if its attempts to raise new capital fail, three people familiar with the matter told Reuters.
JPMorgan Chase has been helping the bank find new sources of capital after a $30 billion infusion of deposits from major banks failed to quell fears about its viability.
The bank is looking at how it can sell parts of its business, including part of its loan portfolio, in a bid to raise cash and cut costs, a person familiar with the situation said.
Selling loans to other parties, including private equity firms, is an option under consideration, two of the sources said. While a sale of the bank as a whole is still possible, First Republic is focused on raising capital, the third source said.
The scenarios were being discussed as top bank executives gathered in Washington for a scheduled two-day meeting starting on Tuesday, sources familiar with the matter said.
Source: Moneytimes
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