First Republic Bank shares just crashed 50%. Here's how ASX 200 ...

26 Apr 2023

Motley Fool Australia

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Key pointsAfter reporting massive deposit outflows, investors dumped First Republic Bank sharesThe ASX 200 banks are holding their own today, largely in line with the benchmark indexThe Aussie banks are the best capitalised in the world, which should offer investors some peace of mind

S&P/ASX 200 Index (ASX: XJO) bank stocks are holding their own in late morning trade on Wednesday.

Investors in the big four ASX bank shares will be keeping a close eye on the charts today following a 49.4% plunge in the First Republic Bank (NYSE: FRC) share price yesterday (overnight Aussie time).

We’ll look at the latest ructions to hit the United States’ banking sector in a tick.

First, here’s how the big four ASX 200 bank stocks are tracking at the time of writing:

Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are up 0.04% National Australia Bank Ltd (ASX: NAB) shares are down 0.49% Westpac Banking Corp (ASX: WBC) shares are down 0.34% Commonwealth Bank of Australia (ASX: CBA) shares are down 0.41%

For some context, the benchmark index is down 0.09% at this same time.

The ASX 200 bank stocks look to be getting plenty of support from their very strong common equity tier 1 (CET1) ratios. This is a measurement of the core equity capital of a bank compared to its risk-weighted assets.

As The Motley Fool reported earlier in April, Australia’s big four banks are the most capitalised in the world. That should offer Aussie investors some peace of mind amid the banking turmoil hitting the US and Europe.

Now, here’s why investors were hitting the sell button on First Republic Bank.

ASX 200 bank stocks resilient amid new US bank meltdown

The First Republic Bank share price crashed overnight following the release of the bank’s first-quarter results.

As you can imagine by the sell-off, those results fell well short of expectations.

Among the big negatives, the bank reported its deposits decreased by US$105 billion over the three months.

Investors are already on edge following the collapse of Silicon Valley Bank and Signature Bank in March. That financial contagion quickly spread to Europe, resulting in the takeover of beleaguered Credit Suisse by Swiss rival UBS.

While ASX 200 bank stocks escaped the worst of that fallout, shares in the big banks did slide during March. Today, however, they’re showing resilience.

Commenting on the deposit outflows that helped send the First Republic share price into a nosedive, chief financial officer of First Republic Neal Holland said:

With the closure of several banks in March, we experienced unprecedented deposit outflows. We moved swiftly and leveraged our high-quality loan and securities portfolios to secure additional liquidity. We are working to restructure our balance sheet and reduce our expenses and short-term borrowings.

With First Republic already having received US$30 billion in emergency funding from larger banks last month, it remains to be seen how this plays out.