The collapse of First Republic continues to send shockwaves through the banking sector

Monday’s collapse of First Republic Bank continued to send shockwaves through the financial sector, despite JP Morgan Chase stepping in to contain the turbulence — several regional banks saw their share price fall by up to 28 percent on Tuesday.

First Republic was acquired by federal authorities on Monday and its assets were sold to JP Morgan Chase.

Jamie Dimon, CEO of JP Morgan Chase, stated, “This part of the crisis is over.”

Still, concerns about the stability of numerous other medium-sized banks remained, and Wednesday’s announcement by the Federal Reserve of a possible rate adjustment only added to the anxiety.

Some analysts think the Federal Reserve will raise interest rates again. If it raises rates, it will make those who have their money in the bank consider withdrawing and shifting their money into other, more lucrative savings.

On Tuesday, shares in Los Angeles-based PacWest closed at $6.55 – down 28 percent in the day.

In five days, PacWest’s value fell 45 percent.

Metropolitan Bank, based in New York City, also suffered, closing 20 percent on Tuesday.

In the past five trading days, 32 percent of Metropolitan’s value has been wiped out.

A third bank, Western Alliance, based in Phoenix, has been hit: Their shares closed 15 percent on Tuesday.

The concern was not limited to those three: an index of regional bank stocks fell by more than 5 percent to the lowest level since 2020.

Citizens, Truit and US Bank each saw their shares drop 7 percent on Tuesday.

The largest banks also fell, but the declines were less severe.

Bank of America closed 3 percent; Wells Fargo fell 4 percent; and JP Morgan Chase fell nearly 2 percent.

While experts have urged calm and say consumers shouldn’t worry that we’re headed for a similar crisis in 2008, there are suggestions that greater instability could lead to even more heartache for medium-sized companies.

Late last month, credit rating agency Moody’s also downgraded 11 regional banks, including Zions Bank, Western Alliance Bank and Bank of Hawaii.

In particular, the company cited fears for commercial real estate portfolios, with medium-sized banks taking a beating from high interest rates and market stress.

Shares in regional banks fell after the fall of First Republic Bank on May 1

Credit rating agency Moody’s downgraded eleven regional banks in April, including the now-collapsed First Republic Bank

A deal was announced on Monday that will allow for an orderly failure of First Republic, following the announcement that JPMorgan Chase has bought the bank.

Following the failures of Silicon Valley Bank and Signature Bank earlier this year, the bank collapsed after investors left the institution and withdrew their shares in large numbers.

While financial markets were calmer as the bank headed for bankruptcy, savers fled regional lenders Monday for fear of more banks.

The KBW Regional Banking Index, an index of smaller regional lenders in the US, lost 2.7 percent to hit a session low.

Shares of Citizens Financial Group, PNC Financial Services Group, Truist Financial Corp and US Bancorp fell between 3 and 7 percent.

Valley National Bancorp, which owns Valley National Bank, lost more than 20 percent.

Western Alliance Bancorp received a two-notch downgrade from rating agency Moody’s

Zions Bancorp, which holds $89 billion in assets, was also among regional banks downgraded by Moody’s

Moody’s expressed concern that regional banks are more exposed to the commercial real estate market, which has been hit hard by higher interest rates.

Medium-sized banks are the country’s largest lenders for projects such as apartment buildings, office towers and shopping malls.

According to the New York Timesvacancy rates are rising across the country and office buildings are empty as more staff work from home.

More than $1 trillion in commercial real estate loans will mature before the end of 2025, and as banks tighten their underwriting obligations, many borrowers may struggle to refinance their debts, the outlet reports.

However, some experts believe that any immediate fallout from First Republic is under control.

“From the beginning, when Silicon Valley started to collapse, the screens were checked and the weak players were identified,” Steve Biggar, an analyst who reports on JPMorgan at Argus Research, told the Times.

“I think the closure of First Republic on this point should allay a lot of the concerns about the banking crisis. All these banks are now in stronger hands.’

Jamie Dimon, chief executive officer of JPMorgan Chase & Co, who said of the purchase of First Republic: ‘Our government invited us and others to act, and we did’

The collapses of Silicon Valley Bank and Signature Bank in March caused a snowball effect

Shares of First Republic Bank closed Friday at $3.51, a fraction of the roughly $150 per share it traded for just three months ago a year ago. It collapsed on Monday, May 1

Thanks in part to stricter regulations introduced in the aftermath of the global financial crisis, fewer banks have failed.

But higher interest rates have eroded the value of assets on banks’ balance sheets, straining the financial system and making it more difficult for banks to repay depositors if they decide to withdraw their money.

In addition, the three U.S. banks that have failed so far this year are greater than the 25 that failed in 2008, data shows.

The three banks had a combined total of $532 billion in assets, which is more than the $526 billion of all U.S. banks that collapsed in 2008 at the height of the financial crisis, according to the New York Times and adjusted for inflation. .

First Republic had about $213 billion in total assets, and late last year the Federal Reserve ranked it 14th among U.S. commercial banks.

Silicon Valley Bank, meanwhile, had $209 billion in total assets, while Signature Bank had $110 billion, bringing its combined total assets to $532 billion.