Markets continue to shift higher, even as investors were reminded of the lingering remnants of the US banking turmoil over the weekend. First Republic, the embattled Californian Lender, was acquired by JP Morgan over the weekend. Private takeovers orchestrated by regulators over weekends has been a recurring theme in 2023 and looks to be the remedy of choice of supervisory bodies at this time.
First Republic is marginally bigger than Silicon Valley Bank, but it again (as of this morning) appears that any potential aftershocks will be contained within regional banking names. First Republic has essentially been up for sale since mid-March, but even as a group of banks deposited $30bn to help shore up the balance sheet no buyer emerged. At the bank’s earnings release last Monday it disclosed that it has shed more than $100bn in deposits in the first quarter – far in excess analysts’ expectations.
Longer term consequences are likely to be the reversal of loosened regulation, with more ‘smaller’ regional names, (albeit very large in comparison to the Irish market) coming under stricter supervision of federal and national regulators. The shorter-term impact is harder to gauge. However, as ever, a focus on companies with strong business models and robust balance sheets remains a solid starting point for allocating within equity portfolios.
As always, if you wish to discuss anything in further detail, please do get in touch.