First Republic drops 25% in spite of liquidity boost 📉 banks under pressure

6:33 PM 17 March 2023

Major US banks deposited 30 billion US dollar at First Republic Bank (FRC.US) yesterday in an attempt to bolster the liquidity position of a troubled bank. Nevertheless, this provided only a short-term relief with shares of First Republic plunging 25% today. Moves of this magnitude show that concerns over potential collapse have not faded away even as major financial institutions pumped funds into the bank.

  • Joe Biden asked Congress to expand FDIC powers and allow it to impose tougher penalties on executives that led to banks' failures. US President specifically highlighted executives from SVB and Signature Bank as ones that may need to be punished for wrongdoings
  • Apart from First Republic Bank, shares of other US banks are also trading under pressure. Sell-off also hits top players in the industry, like JPMorgan (JPM.US) or Wells Fargo (WFC.US)
  • Issues in the European banking sector are also far from over. It was reported today that financial teams at Credit Suisse were asked to come to work over the weekend and explore potential scenarios for the bank
  • It is worrying that even a massive liquidity injection from central banks and strong assurances from regulators that deposits are protected failed to stem sell-off in the banking sector shares

Taking a look at JPMorgan chart (JPM.US) at D1 interval, we can see that a potential head and shoulders pattern is building up. Right shoulder may have been painted already and a pullback is in play. Share price is attempting to break below the 200-session moving average (red line). A break below the $125 area could hint that an even deeper sell-off is looming.

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Source: xStation5

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