Stocks On Wall Street Meandered After Seizure of First Republic Bank

Barry Adams
01 May, 2023
New York City

Stocks on Wall Street traded slightly higher in a cautious trading after the regional banking crisis devoured another bank after weeks of chaos. 

First Republic Bank was taken over by the California Department of Financial Protection and Innovation  and appointed FDIC as receiver. 

After the competitive bidding process over the weekend, FDIC transferred the majority of all assets and deposits to JP Morgan Bank. 

First Republic Bank is the second example after the failure of Silicon Valley Bank of how regulators at all levels and board of directors failed to stem the risk stemming from the rapid rise in interest rates over the last thirteen months. 

The failure of Silicon Valley Bank cost the deposit insurance fund about $20 billion and the First Republic Bank seizure is expected to cost at least $13 billion, according to the FDIC. 

The FDIC has its own capital shortfall issues as well, the deposit insurance fund is very thinly capitalized and needs at least another $85 billion to meet the statutory capital requirement as determined by the U.S. Congress. 

This capital shortfall was before the cost of the failure of Silicon Valley Bank and First Republic Bank. 

 

Indexes & Yields 

The S&P 500 index increased 3.32 points to 4,174.36 and the Nasdaq Composite index fell 6.28 points to 12,219.98. 

In the last week, the S&P 500 index added 0.3% and the Nasdaq Composite advanced 0.9%. 

The yield on 2-year Treasury notes inched lower to 4.09%, 10-year Treasury notes rose to 3.47% and 30-year Treasury bonds held at 3.71%. 

Crude oil fell $1.83 to $74.94 a barrel and natural gas prices fell 4 cents to $2.36 a thermal unit. 

 

Stock Movers 

First Republic Bank dropped 34% to $2.30 after the Federal Deposit Insurance Corporation seized the ailing bank. 

JP Morgan agreed to acquire all deposits and a "substantial majority" of the seized bank after the U.S. government agency failed to convince rival banks to acquire the troubled lender. 

First Republic marks the third bank failure of an American bank since March. 

The acquisition includes approximately $173 billion of loans and $30 billion of securities and assumption of approximately $92 billion of deposits, including $30 billion of large bank deposits, which will be repaid post-close or eliminated in consolidation.  

FDIC will provide loss share agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-rate term financing. 

JP Morgan Chase increased 4.4% to $144.30. 

Norwegian Cruise Line Holdings Ltd advanced 1.5% to $13.55 after the company reported its latest quarterly results. 

Revenue in the first quarter soared to $1.8 billion from $521.9 million and the net loss shrank to $159.2 million from $982.7 million and diluted loss per share fell to 38 cents from $2.35 a year ago. 

Gross cruise costs per capacity day was approximately $298 in the quarter and $301 in constant currency. 

Adjusted net cruise costs excluding fuel per capacity day in constant currency was approximately $161, a 14% decrease compared to the second half of 2022 as the company stepped up its cost containment efforts.