Stocks Rose On First Republic's Bailout; Bank's Value Sinks

Markets soared Thursday, but the First Republic Bank's shares gave back all their gains and then some in after-hours trading, all because of additional disclosures that the bank is still not in the pink of financial health, Dan Caplinger reported for Motley Fool.

Photo Insert: First Republic Bank's shares gave back all their gains and then some in after-hours trading.

The stock market has been extremely concerned about the state of the banking system that, when a plan to provide ailing FRB with a massive infusion of deposits was announced, the reaction in stock market indices was positive.

The Nasdaq Composite was once again the big winner, but the rises in the Dow Jones Industrial Average and S&P 500 weren't too shabby. One interesting thing about the rally was that the stock at the center of the rescue effort wasn't able to sustain its gains.

Although FRB shares were up 10% in the regular trading session on Thursday, the bank stock plunged 22% in after-hours trading as of 6 p.m. ET.

The move reflected just how many problems FRB is having and confirmed the need for the historic infusion of cash from some of the biggest financial institutions. As of March 15, FRB had $34 billion in cash, an amount that doesn't include the new deposits from big US banks.

From March 10 to March 15, FRB borrowed anywhere from $20 billion to $109 billion from the Federal Reserve, paying prevailing overnight lending rates of 4.75%.

In addition, the bank had to boost its short-term borrowings from the Federal Home Loan Bank by $10 billion at an even higher rate of 5.09%. In light of its financial stress, the FRB’s board chose to suspend the stock's dividend.

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