The KBW index of regional banks fell by almost 1%. Among individual movers, Citizens Financial Group, PNC Financial Services Group, Truist Financial Corp and US Bancorp fell between 2.2% and 7%.
Earlier today, an agreement was reached, under which JPMorgan Chase & Co will pay $10.6 billion to the U.S. Federal Deposit Insurance Corporation (FDIC) for most of the assets of First Republic, whose bankruptcy is the largest since Washington Mutual in 2008.
While investors digested the quick deal for First Republic assets with a pinch of salt, the bailout effort engineered by regulators sparked a sell-off in the mid-cap banking sector. Wall Street analysts, however, were largely sanguine on rescue.
The deal announced on Monday allows for an orderly failure of the First Republic and spares regulators having to insure all of the bank’s deposits, as they had to when two others collapsed in March.
“It helps to bring the banking crisis phase to an end. It does NOT mean that all problems are solved – recession, CRE, funding, ALM, etc. – but that we do not expect more bank failures in the SPX anytime soon,” Wells Fargo analysts said in a note.
The global banking sector was rocked by the shutdown of Silicon Valley Bank and Signature Bank in March.