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First Republic Bank gets $30 bn lifeline, but investors worry its a slow death



A $30 billion lifeline for First Republic Bank hosed down market fears about an imminent banking collapse on Friday, but a late tumble in the troubled U.S. lender’s shares showed investors were still worried about cracks in the sector.

Traders work at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City.(REUTERS)
Traders work at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City.(REUTERS)

Large U.S. banks injected the funds into San Francisco-based bank on Thursday, swooping in to rescue the lender caught up in a widening crisis triggered by the collapse of two other mid-size U.S. lenders over the past week.

Read here: Third collapse in a week? Big US banks rush to rescue First Republic Bank

The deal was put together by top power brokers including U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and JPMorgan Chase CEO Jamie Dimon, who had discussed the package this week, according to a source familiar with the situation.

The package came less than a day after Swiss bank Credit Suisse clinched an emergency central bank loan of up to $54 billion to shore up its liquidity.


Those deals helped restore calm to global markets on Thursday and Friday, following a torrid week for banking stocks.

However, while First Republic’s stock closed up 10% on news of the rescue, its shares fell 18% in after-market trading after the bank said it would suspend its dividend and disclosed its cash position and just how much emergency liquidity it needed.

Analysts says authorities appear eager to quickly deal with systemic risks, but worry the potential for a banking crisis is far from over.

“They will keep the money in First Republic to keep it alive for self interest … to stop the run on banks. Then they will take it away gradually and the bank will play out a slow death,” said Mathan Somasundaram, founder at research firm Deep Data Analytics in Sydney.

“Yellen was clear overnight that all bank deposits were protected, but the bank might not be there,” he said.


Some of the biggest U.S. banking names including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp, Wells Fargo & Co, Goldman Sachs and Morgan Stanley were involved in the rescue, according to a statement from the banks.

While the support has prevented an imminent collapse, investors were startled by late disclosures about First Republic’s cash position, even after the injection, and just how much it and others leaned on the Fed this month for support.

Data on Thursday showed banks in the United States sought record amounts of emergency liquidity from the Fed in recent days, driving up the size of the central bank’s balance sheet after months of contraction.

More broadly, worries about contagion risks persist.

“I don’t think we are in the crux of a global financial crisis. Balance sheets are much better than they were in 2008, banks are better regulated,” said Karen Jorritsma, head of Australian equities, RBC Capital Markets. “But people are concerned that the contagion risk is real, and that rattles confidence.”



For now, authorities are confident the banking system is resilient and have tried to emphasise that the current turmoil is different to the global financial crisis 15 years ago as banks are better capitalised and funds more easily available.

On Thursday, the European Central Bank pressed forward with a 50-basis-point rate hike, arguing that euro zone banks were in good shape and that if anything, the move to higher rates should bolster their margins.

Focus now swings to the Fed’s policy decision next week and whether it will stick with its aggressive interest rate hikes as it seeks to get inflation under control.

In Asia, Singapore, Australia and New Zealand said they were monitoring financial markets but were confident their local banks were well capitalised and able to withstand major shocks.


Japan’s finance ministry, financial regulator and central bank said they would meet on Friday to discuss financial market developments.

Banking stocks globally have been battered since Silicon Valley Bank collapsed last week due to bond-related losses that piled up when interest rates surged last year, raising questions about what else might be lurking in the wider banking system.

Within days, the market turmoil had ensnared Credit Suisse, forcing it to borrow from Switzerland’s central bank.

By Thursday, the spotlight whipsawed back to the United States as big banks shored up support for First Republic, a regional lender. Its shares have dropped more than 70% since March 6.

Credit Suisse became the first major global bank to take up an emergency lifeline since the 2008 financial crisis as fears of contagion swept the banking sector and raised doubts over whether central banks will be able to sustain aggressive rate hikes to rein in inflation.


Rapidly rising rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders already worried about a recession.

Credit Suisse shares closed 19% higher on Thursday, recovering some of their 25% fall on Wednesday. Since March 8, European banks have lost around $165 billion in market value, Refinitiv data shows.

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Ubs: Deutsche Bank, UBS hit as bank fears spark stress signals




LONDON: European banking stocks fell sharply on Friday, with Deutsche Bank and UBS knocked by worries that actions by regulators and central banks have not yet contained the worst problems to face the sector since the 2008 global financial crisis.
Financial market stress indicators were also again flashing warning signs more widely, with the euro falling against the dollar and bond yields sinking.
Deutsche Bank shares fell for a third day, dropping more than 12% after a sharp jump in the cost of insuring its bonds against the risk of default.
Shares in Germany’s largest bank have lost a fifth of their value so far this month and the cost of its 5-year credit default swaps (CDS) – a form of insurance for bondholders – jumped to a four-year high on Friday, based on data from S&P Market Intelligence.
“Deutsche Bank has been in the spotlight for a while now, in a similar way to how Credit Suisse had been,” said Stuart Cole, head macro economist at Equiti Capital.
“It has gone through various restructurings and changes of leadership in attempts to get it back on a solid footing but so far none of these efforts appear to have really worked.”
Deutsche Bank declined to comment.
The pain was spread across the sector, with the index of top European banks falling 5.1% and British banks losing 4%, down for a third straight session.
“We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone’s minds (fairly or unfairly), said Chris Beauchamp, chief market analyst at IG.
The fresh falls in Europe came as investors were looking to see how farUS authorities would go to shore up the banking sector, particularly fragile regional lenders.
US treasury secretary Janet Yellen told lawmakers on Thursday that bank regulators and the Treasury were prepared to make comprehensive deposit guarantees at other banks, as they did at failed Silicon Valley Bank (SVB) and Signature Bank.
Shares of major US banks JPMorgan Chase & Co, Wells Fargo and Bank of America fell more than 2% in premarket trade on Friday.
Regional lenders, the focus of the strongest investor concerns, also declined, with First Republic Bank, PacWest Bancorp, Western Alliance Bancorp and Truist Financial Corp falling between 2% and 5%.
“Underlying sentiment is still cautious and in this environment no one wants to go into the weekend risk-on,” said Nordea chief analyst Jan von Gerich.
UBS challenges
The global banking sector has been rocked since the sudden collapse this month of SVB and Signature Bank.
Policymakers have stressed the turmoil is different from the global financial crisis 15 years ago, saying banks are better capitalised and funds more easily available.
But the worries spread quickly, and on Sunday UBS was rushed into taking over Swiss rival Credit Suisse after it lost the confidence of investors.
Swiss authorities and UBS are racing to close the takeover within as little as a month, according to two sources with knowledge of the plans.
Separate sources told Reuters that UBS has promised retention packages to Credit Suisse wealth management staff in Asia to stem a talent exodus.
Brokerage group Jefferies cut its recommendation on UBS stock to “hold” from “buy”, saying the acquisition of its former rival would change an equity story based on a lower risk profile, organic growth and high capital returns.
“All these elements, which is what UBS shareholders bought into, are gone, likely for years,” it said.
UBS shares were down 7% on Friday and its five-year CDS shot up 14 basis points.
AT1 bonds
The rescue of Credit Suisse has also ignited broader worries about investors’ exposure to a fragile banking sector. The decision to prioritise shareholders over Additional Tier 1 (AT1) bondholders rattled the $275 billion AT1 bond market.
These convertible bonds were designed to be invoked during rescues to prevent the costs of bailouts falling onto taxpayers.
As part of the deal with UBS, the Swiss regulator determined that Credit Suisse’s AT1 bonds with a notional value of $17 billion would be wiped out, stunning global credit markets.
European banks’ AT1 debt came under fresh selling pressure on Friday, with Deutsche Bank and UBS AT1s down around four and two cents in price, respectively, according to Tradeweb data.
Standard Chartered Chief Executive Bill Winters said on Friday the wipeout of Credit Suisse bondholders had “profound” implications for global bank regulations.
“I think it had very profound implications for the regulation of banks, and for the way that banks manage themselves,” Winters told a financial forum in Hong Kong.
He also said theUS Federal Reserve’s move to guarantee non-insured deposits was a “moral hazard”.
US authorities had invoked “systemic risk exceptions” after the failures of SVB and Signature Bank that allowed them to protect uninsured deposits, including those of wealthy technology executives and cryptocurrency investors.

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DMRC asks Supreme Court to urgently take up its curative petition in DAMEPL case




NEW DELHI: The Delhi Metro Rail Corporation (DMRC) on Friday asked the Supreme Court to urgently take up its curative petition against the top court’s 2021 order that required it to pay Delhi Airport Metro Express Private Limited (DAMEPL), a subsidiary of Anil Ambani-owned Reliance Infrastructure Limited an amount to the tune of over 8,000 crore.

Supreme Court (HT File Photo)
Supreme Court (HT File Photo)

Attorney general R Venkatramani told a bench headed by Chief Justice of India (CJI) Dhananjaya Y Chandrachud that the curative petition was pending since August last year and requires to be heard urgently following a recent Delhi high court verdict directing the Centre and Delhi government to extend a sovereign guarantee to DMRC to pay the outstanding amount to DAMEPL as part of an arbitral award.

“The curative petition needs to be heard immediately otherwise by March 31, DMRC will come to a halt,” the Centre’s top law officer said, pointing that the high court has given two weeks for the Centre and Delhi government to act upon DMRC’s request to clear its liabilities under the award.

The bench, also comprising justices PS Narasimha and JB Pardiwala, assured Venkatramani that the matter will be circulated among the other judges forming part of the bench.

The curative petition is taken up by a bench headed by CJI along with two senior most judges and the judges who authored the earlier decision, if present.


“The matter could not be listed earlier as Justice Bhat was travelling. We will list it soon by circulation,” the CJI said.

DMRC, a 50:50 joint venture between the Government of India (GOI) and the Delhi government, terminated its contract with DAMEPL to operate the 22.7km Airport Metro Express line in October 2012. An arbitral tribunal, in May 2017, ruled in favour of DAMEPL, which pulled out of running the Airport Express metro line over safety issues. The award was upheld by the high court’s single-judge bench in 2018 but a two-judge bench set it aside in 2019.

When the case came to the top court, the Supreme Court upheld the initial verdict awarding damages to DAMEPL in September 2021. The DMRC filed a review petition which was dismissed by a two-judge bench comprising Justice L Nageswara Rao (since retired) and justice S Ravindra Bhat in November 2021. The metro rail corporation has deposited an amount of 1678.42 crore out of the total liability of 8009.38 crore.

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US, global markets fall on banking turmoil: Report




Shares on Wall Street tumbled in premarket trading Friday as worries flared over turmoil in the banking sector and potentially worsening risks of recession.

A sign for a Wall Street building is shown, (AP file photo)
A sign for a Wall Street building is shown, (AP file photo)

Futures for the Dow Jones Industrial Average slid 1% before the bell and the benchmark S&P 500 fell 0.8%.

Most U.S. bank stocks fell between 2% and 4%, dragged down by Deutsche Bank, which fell more than 10% on reports that the company was facing higher costs for insuring itself against default.

Investors are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.


Shares in the troubled First Republic Bank slid another 5% early Friday, while KeyCorp, PNC and M&T all fell more than 2%.

Deutsche Bank’s shares plunged as much as14% after an overnight surge in credit default swaps — a hedge against defaults for bond investors. Other European banks also lost ground. Commerzbank dropped 8.7%, Societe General skidded 7.7% and Credit Suisse, itself subject to a government-arranged buyout by UBS, dropped 8.6%. UBS gave up 8%.

Regional banks’ shares in Asia were modestly lower Friday, with HSBC Holdings plc losing 2.9% in Hong Kong while mid-sized Japanese bank Resona Holdings declined 2.6%.

Shares in Japanese energy and electronics company Toshiba Corp. gained 4.2% after it announced late Thursday that it had accepted a $15 billion tender offer from a buyout fund made up of the nation’s major banks and companies. If regulators approve it, the proposed buyout by private equity firm Japan Industrial Partners would be a major step in troubled Toshiba’s yearslong turnaround effort, allowing it to go private.

In Europe at midday, Germany’s DAX lost 2.4%, the CAC 40 in Paris tumbled 2.3% and Britain’s FTSE 100 declined 1.8%.


Tokyo’s Nikkei 225 index lost 0.1% to 27,385.25 and the Kospi in Seoul gave up 0.4% to 2,414.96. Hong Kong’s Hang Seng slipped 0.7% to 19,915.68 and the Shanghai Composite index sank 0.6% to 3,265.65.

Australia’s S&P/ASX 200 shed 0.2% to 6,955.20. Shares fell in Mumbai but rose in Bangkok and Taiwan.

Oil prices fell 3.5% after Energy Secretary Jennifer Granholm said re-filling the U.S. strategic reserves would take years. The Biden Administration released hundreds of millions of barrels from the reserve to counter skyrocketing gas prices after Russia invaded Ukraine.

The reserve has fallen to levels not seen since the early 1980s and some of the price support for crude at around $70 per barrel was based on those reserves being topped off.

U.S. benchmark crude oil dropped $2.45 to $67.51 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 94 cents to $69.96 per barrel on Thursday.


Brent crude, the pricing basis for international oil, lost $2.44 to $73.06 per barrel.

The U.S. dollar fell to 129.97 yen from 130.83 yen. The euro slipped to $1.0742 from $1.0833.

On Thursday, the S&P 500 added 0.3% for its third gain in four days while the Dow Jones Industrial Average gained 0.2%. The Nasdaq composite held up better thanks to strength in technology shares, gaining 1%.

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