First Republic and Credit Suisse stocks plummet despite fresh capital

Shares in First Republic Bank and Credit Suisse fell on Friday, continuing their downtrends that were interrupted on Thursday as both banks received emergency funding commitments to shore up their struggling finances.

First Republic Bank plunged 33% on Friday to close at $23.03, while Credit Suisse fell 7% to end the day at $2.01. The declines come after shares in First Republic rose on Thursday, while shares in Credit Suisse were flat, reflecting a short-lived respite.

Both banks received commitments for capital injections earlier this week, with a consortium of 11 major financial institutions agreeing to provide $30 billion to First Republic Bank and the Swiss central bank agreeing to inject nearly $54 billion to Credit Suisse to provide. But fears for its financial stability lingered on Friday, when First Republic announced late Thursday — just hours after banks pledged to provide the funding — that it would stop paying dividends.

First Republic had $176 billion in deposits in December

“In our view, this reinforces fears that other regional banks may experience deposit outflows, although we would expect outflows to be much smaller,” CFRA Research analyst Alexander Yokum wrote in a note on Friday.

Credit Suisse, meanwhile, failed to allay deeper concerns about its finances despite being approved this week to borrow up to $54 billion from the Swiss National Bank. The capital injection will not solve Credit Suisse’s main problem, which is that it has not been profitable for two years, analysts at Capital Economics said.

Credit Suisse has a plan to address the problem over a three-year period, “but it’s uncertain whether markets will last that long,” Andrew Kenningham, chief economist for Europe at Capital Economics, said in an investor note on Friday.

Similarities to Silicon Valley Bank

Investors grew suspicious of the First Republic of San Francisco after California regulators seized Silicon Valley Bank on March 10. As with Silicon Valley Bank, a significant portion of First Republic’s deposits are uninsured, making them more vulnerable to withdrawals from shy customers. The bank has $212 billion in assets under management and employs approximately 7,200 people.

With questions about First Republic’s financial stability, its share price has plummeted, losing 81% of its value since the beginning of the month.

Meanwhile, Credit Suisse’s troubles began well before the collapse of Silicon Valley Bank. It caused $8 billion in net losses last year — the largest the company has ever recorded.

Credit Suisse is “a major threat to the global economy,” in part because it has subsidiaries outside of Switzerland and handles hedge fund trading, Kenningham said.

Shares of other regional banks, including KeyCorp, Pacific West, Western Alliance and Zions, fell between 7% and 11% on Friday, but those banks weren’t promised billions of dollars in aid like Credit Suisse and First Republic.

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Christopher J Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories ranging from economic inequality and housing issues to bankruptcy and sports deals.