Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

First Republic shares tank almost 33% despite $30 billion support

Published 03/17/2023, 04:04 AM
Updated 03/17/2023, 09:16 PM
© Reuters. A person walks past a First Republic Bank branch in Midtown Manhattan in New York City, New York, U.S., March 13, 2023. REUTERS/Mike Segar

By Medha Singh and Joice Alves

(Reuters) - Shares of First Republic Bank (NYSE:FRC) tumbled nearly 33% on Friday, leaving them down more than 80% in the past 10 sessions, despite a rescue package with $30 billion in deposits injected by large U.S. banks.

The beleaguered lender was in talks to raise money from other banks or private equity firms by selling new shares, the New York Times reported on Friday afternoon, citing three people with knowledge of the process. The bank could also negotiate to be sold, the report said. First Republic declined to comment.

Concerns about the bank's health prompted top power brokers including U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and JPMorgan CEO Jamie Dimon to put together an unprecedented rescue deal on Thursday. The lender also said it had borrowed up to $109 billion from the U.S. Federal Reserve and an additional $10 billion from the Federal Home Loan Bank on March 9.

"The significance of the changes in (the company's) balance sheet in just one week are staggering ... and along with the suspension of the common stock dividend, paints a very dire outlook for the company and shareholders," said KBW Managing Director Chris McGratty.

Late on Friday, Moody's (NYSE:MCO) downgraded First Republic Bank's debt ratings to reflect its "significant challenges".

GRAPHIC - First Republic Bank's stock market collapse

https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqkwnxpw/Pasted%20image%201679066345614.png

Shares of Wall Street banks including JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC) and Wells Fargo (NYSE:WFC) & Co involved in the San Francisco-based lender's rescue dropped between 2% and 4% on Friday.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Los Angeles-based PacWest Bancorp, the holding company for Pacific Western Bank, slumped almost 19% during Friday's trading session. After the bell, the bank said in a statement that it had more than $10.8 billion in available cash, exceeding its total uninsured deposits.

Founded in 1985, First Republic had $212 billion in assets and $176.4 billion in deposits as of the end of last year, according to its annual report.

"Possibly the market is looking for an all-out sale/buyer rather than an injection of capital," said John Petrides, portfolio manager at Tocqueville Asset Management, adding the situation is not over.

The bank's earnings profile is "clearly impaired" and the "new deposits effectively bridge the estimated $30.5 billion of uninsured deposits still on FRC's balance sheet providing time for FRC to likely explore a sale," Jefferies analysts led by Ken Usdin wrote in a note to clients.

The banks that were part of First Republic's rescue package are its most likely suitors for an acquisition, but the U.S. government is less likely to endorse a purchase by the biggest banks, said a source who declined to be identified because of the sensitivity of the situation.

The rescue package came less than a day after Swiss bank Credit Suisse clinched an emergency central bank loan of up to $54 billion to shore up its liquidity.

Fed data on Thursday showed banks sought a record $152.9 billion in emergency liquidity from the U.S. central bank over recent days, surpassing previous high that was set during the most acute phase of the financial crisis.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The borrowings speak to the "funding and liquidity strains on banks, driven by weakening depositor confidence," Moody's said. The ratings agency had downgraded its outlook on the U.S. banking system to negative earlier this week.

Latest comments

Oversold
Maybe USB should kick in 10B more, or so vs. looking to buy the SVB mess. Or maybe not. SVB is a goner, and perhaps FRC is right behind it. No bailouts, back-stoos, or tax payer funded loans.
Welcome Bank Bang ......when greedy blood sucking bank 💥 like 🎈
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.