The KBW Regional Banking Index was down nearly 1%. Among individual movers, Citizens Financial Group, PNC Financial Services Group, Truist Financial Corp and U.S. Bancorp fell between 2.2% and 7%.
Earlier in the day, a deal was struck, under which JPMorgan Chase & Co will pay $10.6 billion to the U.S. Federal Deposit Insurance Corp (FDIC) for most of the assets of First Republic, whose failure is the largest since Washington Mutual in 2008.
While investors digested the quick deal for First Republic’s assets with a pinch of salt, the regulator-engineered rescue effort sparked a sell-off in the mid-cap bank sector. Wall Street analysts were, however, largely sanguine about the rescue.
The deal announced on Monday allows for an orderly failure of First Republic and avoids regulators having to insure all the bank’s deposits, as they had to do when two others collapsed in March.
“This helps bring the bank crisis phase to the home stretch in our view. This is NOT to say that all problems are over – recession, CRE, funding, ALM, etc. – but that we do not expect more failures of banks in the SPX any time soon,” Wells Fargo analysts said in a note.
Global banking has been rocked by the closure of Silicon Valley Bank and Signature Bank in March.
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