People are seen at the First Republic Bank branch in Midtown Manhattan in New York City, New York, U.S., March 13, 2023. REUTERS/Mike Segar
Mike Segar | Reuters
Shares of First Republic were under heavy pressure on Friday, despite the downed regional bank receiving help from other financial institutions the day before.
At the close of the market, the stock fell 32.8%, the worst performer in the SPDR S&P Regional Banking ETF (KRE) – which fell 6.0%. Pac West lost 19% and Western Alliance fell 15% while US Bank Corp decreased by more than 9%.
Those losses came even after 11 other banks pledged to deposit $30 billion into First Republic as a show of confidence in the company.
“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and demonstrates their overall commitment to helping banks serve their customers and communities,” said the group, which includes Goldman Sachs, Morgan Stanley and Citigroup included. in a statement.
First Republic Bank continued to crater on Friday.
There were concerns that Thursday’s infusion still wouldn’t be enough to sustain First Republic going forward.
Atlantic Equities downgraded First Republic’s rating to neutral, noting that the bank may need an additional $5 billion in capital.
“Management is exploring several strategic options, including a full sale or divestment of parts of the loan portfolio. The limited information provided implies that the balance sheet has grown significantly, which may necessitate a capital increase,” wrote analyst John Heagerty.
Meanwhile, Wedbush analysts put a $5 price target on First Republic and said a takeover could wipe out most of its equity value.
“A distressed M&A sale could result in minimal or no residual value to holders of common stock because of FRC’s significant negative tangible book value, taking into account the fair value markings on its loans and securities.”
Late Friday, after the stock market closed, the New York Times reported that First Republic was in talks to raise capital by selling stock to other public-private banks or private equity firms in a private sale. The terms of the deal, such as the price of the shares, how many and to whom, were still under discussion, and it was also possible that the entire bank could be sold, the Times said.
– CNBC’s Michael Bloom and Scott Schnipper contributed to this report.
