Authorities and big banks come to the aid of the First American Republic, after giving Credit Suisse a breath of oxygen

The SVB earthquake continues to claim victims on the other side of the Atlantic. It’s about First Republic Bank, one of the most affected by the turbulence in recent days. And to avoid greater evils, the big banks and the US government decided to join forces to stabilize the Californian entity and stop the contagion. As Bloomberg predicted this Thursday, with the coordination of the Biden administration, banks such as JPMorgan, Citigroup, Bank of America, Wells Fargo, Morgan Stanley and PNC Financial Services would decide to roll up their sleeves and sit down at the table to negotiate a joint bailout and deposit about $30,000 million in First Republic Bank, the nation’s 14th largest bank by assets. Another option that was on the table at the beginning of the day was the takeover of the bank by a rival.

In the end, the first option won. Eleven large American banks, led by JP Morgan, they threw a lifeline to the First Republic. A lifeline that involves injecting some $30,000 million into deposits. As he discovered The Wall Street Journal, JP Morgan, Bank of America, Citigroup and Wells Fargo will contribute $5 billion each. Morgan Stanley and Goldman Sachs will allocate another 2,500 million from their own pockets, while the remaining 5,000 will have to be distributed among smaller entities: PNC Financial Services, Bank of New York Mellon, Trust Financial, State Street and US Bancorp (1,000 million each). ).And).

What will this help entail? They will not buy the entity, nor will they recapitalize. Each of them will deposit a million dollar deposit with which they will try to pull the bank out of the liquidity crisis.

The authorities wanted to thank the big banks for their gesture. The Treasury Department, the Federal Reserve (Fed) and other US public institutions wanted to appreciate this gesture: “This show of support from a group of major banks is greatly appreciated and demonstrates the resilience of the banking system,” they assured. office directors in a statement.

It seems to have worked. Because First Republic shares rose 11.42 percent at 15:42 local time, a sharp contrast to the nearly 30% drop earlier this morning.

Credit Suisse also gets an oxygen balloon

Western financial authorities are still trying to stop the domino effect caused by the collapse of Silicon Valley Bank last week. On this side of the ocean, eyes are fixed Credit Suisse, who managed to breathe a sigh of relief this Thursday after two days of heart attack. The Swiss moved from rumors and words to actions and after Black Wednesday, in which the price fell by more than 24 percent, they decided to cut their losses and officially asked the Swiss Central Bank for 54,000 million dollars (about 50,000 million euros) to try to “preventively strengthen its liquidity”.

The announcement was made this Thursday morning in the form of a press release. In it, Credit Suisse he also offered to launch a debt buyback program denominated in dollars and euros worth 3,000 million Swiss francs. The statement achieved the desired effect and the dust settled. Shares of that entity recovered this Thursday and managed to rise 19.15% at the end of the day on the Swiss floor, although they rose more than 32% in the first minutes of trading.

One of the biggest credibility crises of the historic Swiss entity seemed to have disappeared. The wave that would later become a real tsunami started on Wednesday, after they were responsible for Credit Suisse admit that in their annual report there were significant material weaknesses in the results they presented in 2021 and 2022. These words cast significant doubt on the veracity of their results. The wave grew out of proportion when, shortly afterwards, the Saudi National Bank – its main shareholder with almost 10% of the capital – guaranteed that it would not increase its participation in the bank and that it would not provide more financial assistance to clean up the entity’s damaged accounts.

Faced with the bleeding caused by these words in his quote, Credit Suisse he didn’t want to wait for the opening on Thursday. At dawn, he asked for a loan in order to try to get the water to gradually return to its flow as soon as the bags were opened. The idea is to access assistance through short-term credit lines and liquidity lines, which will be guaranteed by high-quality assets.

And shopping?

One of the options put on the table these days to try to stop the crisis included the eventual purchase of the entity by UBS, the largest bank in the country and a direct competitor of Credit Suisse. But this same Thursday, both entities shut down this route. The CEO of UBS, Ralph Hamers, put the ghosts aside with a rather categorical sentence: “We are focused on ourselves.”