US Fulton Financial’s shares up on purchase of failed bank deposits, assets
Regional banks have been grappling with challenges in retaining deposits, as customers flock to the perceived safety of larger ‘too-big-to-fail’ institutions. Additionally, the impact of higher interest rates has eroded the value of their loan portfolios, leading to increased unrealised losses.
Republic Bank faced various issues including low liquidity, failure to file annual reports with the US SEC, and pressure from activist investors since 2021.
With approximately $6 billion in total assets and $4 billion in deposits, the troubled lender was closed by the Pennsylvania Department of Banking and Securities on Friday, with the FDIC appointed as its receiver. The estimated cost to the Deposit Insurance Fund related to Republic Bank’s failure is $667 million.
Concerns about sector-wide contagion were heightened following the collapses of Silicon Valley Bank, First Republic, and Signature Bank in early 2023, which triggered a global sell-off in banking stocks and increased regulatory scrutiny.
In February, Republic First disclosed the termination of a planned $35 million funding by an investor group led by George Norcross, Philip Norcross, and Gregory Braca. Regulators had reportedly been exploring a sale of the bank prior to the capital infusion deal, according to Reuters.
Fulton, based in Philadelphia, foresees the acquisition doubling its presence in the Philadelphia market. Management is set to discuss the deal at an investor conference later in the day.
Analysts at Jefferies anticipate a smooth integration, expecting it to enhance Fulton’s liquidity despite being the largest deal it has undertaken since the global financial crisis.
Fulton’s stock surged by 11 per cent to $17.31 before the market opened, reflecting optimism. With a market capitalisation of $2.53 billion, its shares were previously delisted from Nasdaq in August and now traded over the counter.
The KBW Regional Banking Index, indicating investor sentiment towards the industry, has declined by 10.5 per cent year-to-date.
