Both are vulnerable to interest rate policies because of their insatiable need for revolving lines of credit.
It wasn't really either - at least not directly. It had no crypto exposure and its tech company clients were doing fine. It was a poorly written and poorly timed press release and customer call. The bank was solvent - it had $200+B in assets - sold some securities for a loss of $2B or so, and announced it was going to raise $2B in stock to strengthen its balance sheet. It was a well-capitalized bank and even with the run and shutdown, it should have more assets than liabilities to sort out money to clients (who knows how long it might take though). 2 weeks ago, the capital raise is a non-story though the stock drops some. But coming on the same day Silvergate announced its liquidation, it caused Founders Fund and others to tell their clients to take their money out and launched an old-fashioned bank run. If they had done it a few days earlier, waited another week, worded the press release differently, or if the CEO didn't tell his customers not to panic, the bank probably survives just fine and is a reasonably healthy bank. But no bank can survive an all-out bank run. They literally destroyed one of the largest banks in the country by accident/stupidity.
Fair.... but this didn't happen at some regional bank in the Midwest. Would VC clients be less prone to react in a different environment that favors risk, I think so. Seems like clients were already withdrawing their deposits before a poorly written press release. https://www.cnbc.com/2023/03/10/silicon-valley-bank-collapse-how-it-happened.html
on the heels of the bank run on SVB, First Republic Bank Stock Drops Over 60%. at the beginning of 2023, the stock price for FRC was ~~ 122, it was traded as low as 17 yesterday think this is an over-reaction, in sympathy to the SVG bank run; reviewed the financials for FRC, unlike SVB, Calif-based regional bank has a diverse, loan portfolio, less vulnerable to high interest rate. willing to take a risk of FRC. when it was traded ~ 22, sold a naked put on FRC; the 25 strike PUT, 17 March expiration, collecting a premium of $12.4 buy a much longer-dated CALL; 55 strike CALL, Dec 15 eiration, paying around $12 i need FRC to closed abve $25 on this coming Fri, in order for me to keep that premium collected ($12.4); then i will started selling out-of-money CALLs against the long leg
Good news! Credit Suisse is down 25% (and still falling). All the European banks are getting hammered today.
with 15 min to go before closing, FRC is trading ~~$23.7. since the 25 strike PUT is in-the-money, had to pay ~ $1.8 to close that naked PUT effectively, i netted $10.6, ($12.4 premium collected in advance - $1.6) decided to take another risk on FRC sold another naked PUT, FRC 04/21/2023 25.00 P, and collected $10.6 premium in advance i need FRC to close above 25, at expiration, in order for me to keep all the premium collected
should FRC fall to zero, my max risk would be $14.4 (25 - 10.6); having collected $10.4 premium in advance, should the other side choose to exercise their long option to sell , I am obligated to buy FRC at $25 some developments / catalysts in the offing that could dramtically impact FEC stock price https://www.morningstar.com/news/ma...n-raising-more-support-for-first-republic-wsj, the WSJ has just reported that Jamie Dimon, CEO of JP Morgan, is leading banks in a fresh campaign to shore up First Republic Bank. Eleven banks last week placed $30 billion in deposits with First Republic, but the bank still reported lower deposits late Thursday. Discussions are underway to find ways to convert the $30 billion in deposits into a capital raise, the report said. First Republic stock was paused for trade after losing 37% of its value after S&P downgraded the company's debt to B+ over the weekend for the second time in less than a week. https://www.reuters.com/markets/rates-bonds/fed-seen-likely-raise-policy-rate-above-55-by-september-2023-03-01/#:~:text=March 1 (Reuters) - Federal,the same topic on Tuesday. Federal Reserve Chair Jerome Powell will testify on the U.S. central bank's semiannual monetary policy report to the House Financial Services Committee on March 8 at 10 a.m. ET, the panel said on Wednesday.
Geez. Does anyone know what the actual issue with FRC is? Do they have some liquidity issue simply tied to a run on their deposits? Or is there some larger accounting issue (like SVB's issue with long dated bonds)?
