First Republic Bank Shares Skyrocket-Regional Banks Rally as JPMorgan Chase Offers Support

Janet Yellen, the current United States Secretary of the Treasury and former Chair of the Federal Reserve, has pledged further assistance to depositors if needed, sparking a rebound in regional bank stocks. Amid the turmoil, Yellen's assurance has played a vital role in instilling confidence in the banking sector. Under her leadership, the government is committed to stabilizing the system and restoring depositor confidence during these challenging times.

Shares of First Republic Bank (NYSE:FRC) soared, leading a rally in US lenders, as JPMorgan Chase (NYSE:JPM) and other large banks explore ways to stabilize it. This could involve converting the $30 billion deposits received last week into a capital infusion. First Republic Bank's shares increased as much as 60%, marking the biggest-ever daily gain, while regional banks such as Western Alliance Bancorp and PacWest Bancorp also experienced double-digit growth. The KBW Regional Banking Index surged by as much as 5.5%, reflecting a broader recovery in the banking sector across Europe and the US, as contagion concerns eased following UBS Group AG's rescue deal for Swiss lender Credit Suisse Group AG.

First Republic's first choice is a successful capital raise. However, if it fails, the bank might have to sell parts of its business, cut costs, or sell the bank entirely. Potential buyers could include other banks and private equity firms. The bank's share price plunged over the past two weeks after the failure of Silicon Valley Bank dented sentiment and depositors withdrew money. To alleviate the stress, analysts believe a capital raise would be helpful, but First Republic also faces higher interest expenses from replacing deposit outflows with borrowings and higher cost deposits.

During a question-and-answer session at the American Bankers Association conference, Yellen mentioned that the current banking crisis differs from the 2008 financial debacle and involves contagious bank runs.As reported in Reuters.com She assured the public that the government intends to remain vigilant and could intervene if smaller banks experience difficulties posing a risk of contagion.

US officials are considering temporarily expanding Federal Deposit Insurance Corp. coverage to all deposits if the crisis worsens. First Republic is now looking to raise more capital, with JPMorgan providing advice. One possibility is converting some of the deposits provided by the 11 banks into equity. Yellen noted that deposit outflows among banks have stabilized, and the government's focus is on stabilizing the system and restoring depositor confidence.