The collapse of three midsize banks last week continues to reverberate across the U.S. financial system, with the focus turning to smaller lenders that investors think may wobble if nervous depositors decide to move their money to bigger institutions.
These regional banks have battled market turmoil throughout the week, and faced renewed pressure on Thursday.
Shares of First Republic Bank, whose credit rating was downgraded on Tuesday because of fears it could suffer the same fate as Silicon Valley Bank, fell more than 20 percent in premarket trading. It set up the San Francisco-based bank for a fifth double-digit-percentage decline in six trading days.
The steep decline in market value has raised the possibility of the bank’s takeover, and “any potential sale would likely be a tough outcome for existing shareholders,” analysts at Keefe, Bruyette & Woods wrote in a research note.
Other regional banks saw their shares slide in premarket trading on Thursday: PacWest Bancorp and East West Bancorp both dropped over 10 percent. By contrast, the biggest banks, like JPMorgan Chase and Bank of America, were set to post small gains when markets open.
The turmoil was set in motion by the collapse on Friday of Silicon Valley Bank, a 40-year-old institution based in Santa Clara, Calif. The bank’s failure was the second-largest in U.S. history, and the largest since the financial crisis of 2008.
On Sunday, regulators shut down Signature Bank, a New York financial institution with a big real estate lending business, worried that a bank run could spread and threaten the stability of the entire financial system.