First Republic Bank shows new sediment on the report the government is reluctant to intervene

  • The stock reached a record low for the second day in a row
  • US authorities reluctant to intervene in rescue process report
  • Analysts worried about the bank’s declining options

April 26 (Reuters) – First Republic Bank’s ( FRC.N ) market value plunged below $1 billion for the first time ever on Wednesday after a report said the U.S. government was unwilling to intervene in the bailout process, hammering the lender’s stock.

After a brutal selloff, the bank’s market value was about $886 million at its lowest Wednesday, far from its peak of more than $40 billion in November 2021.

US government officials are currently unwilling to intervene in the bailout process for the First Republic, CNBC reported, citing sources.

The bank has been looking at several options, such as selling assets or creating a “bad bank”, a source familiar with the matter told Reuters on Tuesday.

The bad bank option is a crisis method to isolate financial assets that have problems.

Trading in First Republic’s shares was halted several times. The stock was last down nearly 30% at $5.66.

Reuters graphics
A trader works at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 16, 2023. REUTERS/Brendan McDermid/File Photo

First Republic’s advisers have already lined up potential buyers for new shares in the lender if they can fix the bank’s balance sheet, a report said earlier on Wednesday.

But analysts have highlighted several roadblocks that could complicate rescue efforts for the San Francisco-based lender as it looks to emerge from a crisis triggered by an outflow of more than $100 billion in deposits in the first quarter.

“The (First Republic) assets will be sold, but it may take some time and may be sold at a pretty steep discount to par,” said David Wagner, portfolio manager at Aptus Capital Advisors.

At least three brokerages have cut their price targets on First Republic’s stock since it reported first-quarter earnings on Monday.

“First Republic’s problems are probably idiosyncratic … and they obviously have a painful road ahead of them,” said Art Hogan, market strategist at B Riley Wealth in Boston.

A flurry of earnings reports from regional banks last week had reassured investors, but the banking sector has come under renewed pressure following First Republic’s results.

The KBW Regional Banking index (.KRX) has lost 4.4% so far this week.

Reporting by Niket Nishant in Bengaluru; Editing by Shounak Dasgupta

Our standards: Thomson Reuters Trust Principles.

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