Bank of America
BAC,
+1.68%,
Citigroup
C,
+1.78%,
JPMorgan Chase
JPM,
+1.94%
and Wells Fargo
WFC,
+1.16%
said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank
FRC,
+9.98%
as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.
First Republic’s
FRC,
+9.98%
stock rallied 11%, after hitting an all-time low earlier in the session as speculation had increased about another bank collapse after the failures of Silicon Valley Bank, Silvergate Bank and Signature Bank in the past week.
In a joint statement, the 11 banks said the move “reflects their confidence in First Republic and in banks of all sizes.” The statement continued: “It demonstrates their overall commitment to helping banks serve their customers and communities.”
Goldman Sachs
GS,
+0.93%
and Morgan Stanley
MS,
+1.90%
are each making an uninsured deposit of $2.5 billion, and Bank of New York Mellon
BK,
+0.89%,
PNC
PNC,
+4.05%,
State Street
STT,
+1.42%,
Truist
TFC,
+2.62%
and U.S. Bancorp
USB,
+2.60%
are each making an uninsured deposit of $1 billion.
In a separate statement, First Republic confirmed that it is receiving uninsured deposits totaling $30 billion. “This support from America’s largest banks reflects confidence in First Republic and its ability to continue to provide unwavering exceptional service to its clients and communities,” the bank said.
The banks are requiring First Republic to hold the deposits for at least 120 days, a banking source told MarketWatch.
One advantage of providing deposits is that it can be done more quickly than raising capital through a debt or equity offering or even a government bailout program, sources said.
Janney Montgomery Scott analysts said the deposits are from banks’ cash on the balance sheet. It shows up as “deposits from other banks” on First Republic’s balance sheet.
“It’s obviously high profile, and this happens all the time in the banking industry — it is just a larger deposit than normal in a difficult time,” Janney Montgomery Scott’s Chris Marinac said in an email to Marketwatch. “It is not a bailout in my opinion until new capital is issued by First Republic to these banks. To my knowledge, no preferred or common equity has been issued to these banks.”
Word of a potential deposit deal came earlier in the day, as reports surfaced of a strategic move of some kind for First Republic.
Bank stocks rose and First Republic’s stock moved up on the reports.
Meanwhile, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, FDIC Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu said that “this show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”
Chris Matthews contributed to this report.
