The Swedish fund was the bank’s fifth largest shareholder; the fund’s CEO said the uncertainty surrounding First Republic was too great.
Private Swedish pension fund Alecta has sold its shares in First Republic Bank, the American bank struggling to stay afloat after a serious drop in share value, a bank spokesperson announced March 21. Alecta was the bank’s fifth-largest shareholder.
Alecta took a loss in the deal after losing funds in the collapses of Silicon Valley Bank (SVB) and Signature Bank. First Republic Bank’s shares fell 87% after SVB was forced to close earlier this month. Regarding the latest developments, Alecta CEO Magnus Billing told Bloomberg:
“The uncertainty about First Republic’s future was too great, partly due to the fact that the lender was downgraded to junk status.”
According to media reports, Alecta took a $728 million loss on the sale of its First Republic shares. That loss came on top of roughly $862 million Alecta had in SVB and $310 million in Signature Bank before their closures.
The pension fund’s board asked Billing to investigate whether its "investment strategy, risk allocation and mandate for asset management is optimal” last week. The fund was also in communication with the Swedish Financial Supervisory Authority on its investment in the U.S. banks.
Related: Yellen defends government intervention to avoid another SVB
Alecta has about $116 billion in assets under management, representing the accounts of 2.6 million individuals and 35,000 companies in Sweden. The fund’s solvency ratio was unaffected by the losses from the U.S. banks.
The CEO of Alecta, the Sweden pension fund that lost over $1 billion in the SVB fallout, is concerned about "breaking the markets" if central bank tightening is "too aggressive" https://t.co/CHdP5OUDE5 pic.twitter.com/yQzD5Yj59m
— Bloomberg TV (@BloombergTV) March 14, 2023
After reaching a low of $12.15 on March 20, First Republic Bank’s shares were selling for $17.11 at the time of writing.
Silicon Valley Bank, which largely served the tech startup industry, filed for bankruptcy on March 17 after being forced to sell bonds at a loss to cover a bank run. Signature Bank was closed by New York state authorities on March 12 in an action supported by federal regulators. The bank held deposits of several crypto firms, including Coinbase, Celsius and Paxos, although a New York State Department of Financial Services spokesperson denied the closure was related to crypto.
