Alecta sells entire stake in First Republic Bank at $728 mn

Amidst uncertainty in First Republic Bank, Sweden’s biggest pension fund, Alecta has exited the US-based lender by selling its entire shares at a loss of 7.5 billion kronor ($728 million). First Republic has witnessed relentless selling of its shares due to liquidity risks which came into the limelight after Silicon Valley Bank and Signature Bank’s collapse. Currently, banking stocks globally are under pressure due to contagion fear.

Alecta’s Chief Executive Officer Magnus Billing said in an emailed comment that “the uncertainty about the bank’s future was too great, partly due to the fact that the lender was downgraded to junk status, ” reported Bloomberg.

Billings’ comments come after Bloomberg News obtained a copy of a written response by Alecta to the Swedish Financial Supervisory Authority.

As per the document, Alecta’s total invested capital in the First Republic was around 9.7 billion kronor before March 15 which was also the day of sale.

Alecta added First Republic to its portfolio in 2019 and made several buying — making it the fifth biggest shareholder in the bank.

Last week, Alecta mentioned that it will completely write off its investments in SVB and Signature Bank at $1.1 billion. It also hinted that its investment in the First Republic may also face losses.

Also, on March 15, S&P Global Rating downgraded its long-term issuer credit rating on First Republic Bank to ‘BB+’ from ‘A-‘. The main concern in the First Republic would be the risk of deposit outflows.

S&P highlighted that the bank’s asset quality history has been excellent given the affluent nature of its customer base. That said, the large mortgage portfolio has fallen in fair value as interest rates increased and may provide less financial flexibility if rates remain higher for longer.

However, S&P believes that First Republic’s business position is weaker following the recent events.

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