First Republic shares fall despite deposit infusion, dragging down other regional banks
People are seen inside 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 came under heavy pressure on Friday even though the bankrupt regional bank had received aid from other financial institutions the day before.
As of 3:35 p.m. ET, the stock is down about 30% and is the worst performer of the year SPDR S&P Regional Bank ETF (KRE) — down 6.0%. northwest And Western Union both lose between 16% and 19% each, while KeyCorp slip 7%.
Those losses occurred even after the other 11 banks committed 30 billion USD deposit in the First Republic as a vote of confidence for the company.
“This action by America’s largest banks reflects their faith in the First Republic and banks of all sizes, and demonstrates their shared commitment to helping banks serve their customers.” customers and their communities,” said the group, which includes Goldman Sachs, Morgan Stanley and Citigroup. in a statement.
First Republic Bank continued its decline on Friday.
To be sure, there were concerns that the infusion might not be enough to strengthen the First Republic in the future.
Atlantic Equities downgraded First Republic to neutral, noting that the bank may need an additional $5 billion in capital.
Analyst John Heagerty writes: “Management is exploring various strategic options, which may include selling off all or part of the loan portfolio. The limited information provided implies that the table balance sheet has increased significantly, which may require capital raising.”
Meanwhile, Wedbush analysts set a $5 price target for the First Republicsays a takeover could wipe out most of its equity value.
A distressed M&A sale could result in minimal residual value, if any, for common stock holders due to the FRC’s substantial negative tangible book value after accounting for price signals. fair value for its loans and securities.”
— Michael Bloom of CNBC contributed to this report.