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 was under severe pressure on Friday despite the beleaguered regional bank receiving support from other financial institutions the day before.
At the close of the exchange, the share was down 32.8%, the worst performance in the market SPDR S&P Regional Banking ETF (KRE) — which fell 6.0%. PacWest lost 19% and The Western Alliance fell 15%, while US Bancorp decreased by more than 9%.
These losses came even after 11 other banks pledged to put in $30 billion in First Republic as a vote 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 it demonstrates their overall commitment to helping banks serve their customers and communities,” said the group, which included Goldman Sachs, Morgan Stanley and Citigroup. in a statement.
First Republic Bank continued to crater on Friday.
There were concerns that Thursday’s deposit infusion may still not be enough to support First Republic going forward.
Atlantic Equities downgraded First Republic to neutral, noting that the bank may need an additional $5 billion in capital.
“Management is exploring various strategic options that may include a full sale or divestment of portions of the loan portfolio. The limited information provided suggests that the balance sheet has grown significantly, which may well require a capital increase,” analyst John Heagerty wrote.
Meanwhile, Wedbush analysts set a $5 price target on First Republicand says a takeover could wipe out most of its stock value.
“A distressed M&A sale could result in minimal, if any, residual value to common stockholders due to FRC’s significant negative tangible book value after taking into account fair value marks on its loans and securities.”
Late Friday, after the stock market closed, reported the New York Times that First Republic was in talks to raise capital by selling shares to other unnamed banks or private equity firms in a private sale. The terms of the deal, about the price of the shares, how many and to whom, were still being discussed, and it was also possible that the entire bank would be sold, the Times said.
— CNBC’s Michael Bloom and Scott Schnipper contributed to this report.