Was last year just a prelude?
Every time a bank goes out of business is like a bombshell, shaking the confidence of the market and triggering people to think deeply about financial stability.
According to Reuters, on April 26, local time, the US Federal Deposit Insurance Corp (Federal Deposit Insurance Corp) announced that Pennsylvania regulators closed the Philadelphia-based Republic First Bank (Republic First Bank) and agreed to sell it to Fulton Bank (Fulton Bank).The bank became the first bank in the US to go bankrupt in 2024. The last bank to go bankrupt was Citizens Bank, headquartered in Sauk City, Iowa, which went bankrupt in November last year.
The bank's sudden collapse, reflected in the regional banking crisis behind it, seems to tell us,Last year's wave of bank failures was probably just the beginning.
Asset size: USD 6 billion
As for the name of this bank, at first glance, some might vaguely think:Didn't it just “explode” last year?
This illusion is actually not surprising.
Previously, many investors oftenRepublic First Bank (Republic First Bank)With the 14th largest bank in the US that went out of business in May last year and was acquired by J.P. Morgan ChaseFirst Republic Bank (First Republic Bank)Confusion was implicated when that wave of the US regional banking crisis broke outRepublic First Bank (Republic First Bank) was sold off by investors.It directly plummeted 40% in March 2023, and even the bank's governor personally came forward to refute the rumor.
The governor's statement at the time said that the two banks did not have the same business. Republic First's customers were mainly corporate and retail customers, while First Republic mainly provided loans to wealthy people.
“We use collateral and cash flow as collateral to lend to profitable companies that can pay their debts, and we usually have personal guarantees.”
According to the data, as of January 31, the total assets of Republic First Bank were about 6 billion US dollars (about 43.4 billion yuan), and total deposits were about 4 billion US dollars, or about 29 billion yuan). In light of the collapse of Bank of the Republic, deposit insurance fund losses are expected to reach $667 million.Based on this situation, the FDIC believes that a Fulton Bank acquisition is the least expensive solution compared to other alternatives.
Fulton Bank said in a statement,In addition to deposits, Bank of America has approximately $1.3 billion in loans and other liabilities.
According to the US Federal Deposit Insurance Corporation, First Bank of America became the first bank in the US to go out of business in 2024. The institution's deposit insurance will cover every saver up to $250,000.
In reality, the fall of First Bank of the Republic was not without signs.As early as last year, the bank was already facing the double dilemma of rising costs and profit pressure.
In July 2023, Bank of America faced the dual challenge of falling deposits and declining value of the mortgage business. At the end of the year, the bank had reached an agreement with investors such as George Norcross, but the agreement ended in February 2024. Subsequently, the US Federal Deposit Insurance Corporation resumed the process of seizing and selling the bank.
At the market level, Bank of America's shares were delisted from NASDAQ in August 2023 and are currently traded on the OTC market. Its stock price plummeted all the way from $2 at the beginning of this year to around 1 cent, and its total market value is less than 2 million US dollars.
Profits of a number of banks in the US fell sharply
After experiencing the bankruptcy crisis last year, regional banks in the US continue to face operating pressure and may need to sell assets to stabilize their balance sheets.
The Federal Reserve warns that banks with higher risk commercial real estate and consumer loans may suffer greater losses.SPDR S&P Regional Bank ETFs fell 13% during the year, lagging significantly behind large banks.
Financial reports released by several regional banks showed a sharp decline in profits, mainly due to net interest income being eroded by rising deposit costs, and demand for loans was also suppressed by high interest rates. Among them, PNC Financial, Citizen Financial, M&T Bank, and Bank of America all declined by more than 20%.
Although the Federal Reserve's policies also pose challenges to large banks, large banks are more resilient due to their broad scope of business.After Silicon Valley Bank and others went out of business last year, customer funds went to large institutions. The Federal Reserve has shut down the Bank Term Financing Program (BTFP) designed to meet liquidity needs.
The commercial real estate shock is likely to continue, and regional banks are expected to set aside more funds to cover potential losses and possibly sell more real estate loans. The Federal Reserve report mentioned the risk of falling commercial real estate values, including an increase in consumer debt arrears. According to the International Monetary Fund,The ratio of loans for non-performing commercial real estate doubled to 0.81%. S&P Global downgraded the outlook for five US banks, worrying about pressure on the commercial real estate market.
Federal Reserve Vice Chairman Barr stressed that regulators are paying close attention to commercial real estate loan risks and require banks to strengthen risk management. Analysts expect thatThe banking sector's exposure to commercial real estate is unlikely to cause greater turmoil, but challenges remain.