First Republic Bank shares fall ahead of Fed decision
First Republic Bank shares fell early Wednesday ahead of the Federal Reserve’s interest rate decision.
Shares in the San Francisco-based bank plunged in after-hours trading on Tuesday and was about 2% lower before the market opened on Wednesday, a sign that volatility may not be over yet.
The bank has hired advisers Lazard (ticker: LAZ) and McKinsey & Co. as it explores options including selling or trimming assets, The Wall Street Journal reported. Wall Street executives and U.S. officials are exploring the possibility of government support to secure a deal to strengthen the First Republic, Bloomberg reported late Tuesday.
In Europe, UBS offered to buy back 2.75 billion euros ($2.97 billion) worth of bonds it issued less than a week ago in light of its takeover of longtime rival Credit Suisse
.
The Swiss bank said in a statement that it offered to buy back the debt “as a result of a careful assessment of these latest developments and the issuer̵[ads1]7;s (UBS) long-term commitment to its credit investors.”
UBS shares have retreated more than 12% since before the Credit Suisse deal, and are now close to the level they were trading at before the Silicon Valley bank collapsed earlier this month. After shares fell nearly 20% early Monday, investors may be starting to see the acquisition as a good thing for UBS.
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First Republic ( FRC ) stock also bounced back Tuesday, rising about 30% after a report that JPMorgan Chase ( JPM ) CEO Jamie Dimon was leading bailout talks, according to trhe Journal. However, the shares are still close to 90% down since the beginning of March.
Comments from Treasury Secretary Janet Yellen also appeared to help ease fears, as she said “the situation is stabilizing,” at a banking conference. She also said the government could step in to protect depositors of other banks — as it did with Silicon Valley Bank and Signature Bank — if regulators see a risk of a run on the banking system.
Other regional bank shares received a much-needed boost on Tuesday after a prolonged period of pressure. PacWest Bancorp ( PACW ) shares rose 19%, Western Alliance gained 15% and KeyCorp ( KEY ) closed 9% higher. The US KBW Bank index rose 5% – the best daily performance this year.
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As banking stocks continue to recover, investors will be watching the Fed closely later when it makes its decision on interest rates in March. Expectations have fluctuated significantly over the past 10 days or so, but traders are now predicting a 25 basis point increase, according to the CME FedWatch tool.
“There will be a lot of focus on whether the Fed [will] higher today, but just as important will be how they view the current turmoil and whether they still expect more rate hikes after today, Deutsche Bank analysts said early Wednesday.
Write to Callum Keown at callum.keown@barrons.com
