Swedish Pension Fund Alecta Sells Struggling First Republic Bank Shares Amid US Banking Turmoil

Alecta, Sweden's largest private pension fund, has sold all of its shares in the struggling American bank First Republic Bank (NYSE:FRC) at a loss of $728 million. The San Francisco-based lender has been facing a liquidity crisis due to the rapid collapses of Silicon Valley Bank and Signature Bank. The fund's spokesperson, Jacob Lapidus, announced the sale on March 21.

Alecta's shares in First Republic Bank had fallen 87% after the closure of Silicon Valley Bank earlier this month, impacting the pension fund's investment in three niche banks facing liquidity concerns. 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."

First Republic Bank managed to secure $30 billion from major US banks, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and US Bank. However, some believe this might not be sufficient. JPMorgan Chase CEO Jamie Dimon has reportedly led talks with other big banks regarding additional efforts to stabilize First Republic.

The rapid decline of Silicon Valley Bank and Signature Bank led to investor panic, causing a run on deposits and a market disruption. As a result, the share prices of banks such as First Republic Bank, PacWest Bancorp, and Western Alliance Bancorp plummeted by 60-80%. However, according to Reuters, deposit outflows have slowed or even reversed for some regional banks, which have sought to raise capital privately.

Alecta's losses in First Republic Bank shares came in addition to the $862 million and $310 million it had invested in Silicon Valley Bank and Signature Bank, respectively, before their closures. With $116 billion in assets under management, Alecta represents the accounts of 2.6 million individuals and 35,000 companies in Sweden. The pension fund's solvency ratio remained unaffected by the losses in the US banks.

Silicon Valley Bank 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, with support from federal regulators. The bank held deposits from several crypto firms, including Coinbase, Celsius, and Paxos.