First Republic: Stocks plummet and cause alarm – 04/25/2023 – Market

First Republic stocks fell sharply for a second straight day on Tuesday as Wall Street regulators and financiers struggled to come up with a plan to stabilize the bank.

The share price of First Republic, based in California, fell another 40%, a day after the bank revealed that its clients had withdrawn $100 billion in deposits during last month’s banking turmoil. Year-to-date, the shares have fallen by 90%.

First Republic said on Monday it was looking at “strategic options”, but several people briefed on the situation said the bank was struggling to find a viable solution, such as selling all or part of the institution.

The sources said the bank was in contact with the US government, which is on high alert after the failure of Silicon Valley Bank and Signature Bank last month.

They said the main options are for some of the big US banks that recently deposited $30 billion in the First Republic to bail out the lender, or for the Federal Deposit Insurance Corporation, a guarantor of US bank deposits, to take control of the institution and offer a government guarantee for all deposits, as it did with the SVB.

A person close to First Republic said the bank would appreciate it if the government “convenes the relevant parties to find a solution”.

White House, Federal Reserve and US Treasury officials have held talks with the First Republic in recent days, the people added, as the Biden administration grows increasingly concerned that the bank is running out of time to reassure depositors and investors.

Treasury declined to comment.

One source said the government was not concerned about contagion beyond the First Republic. Despite the sharp drop in bank shares on Tuesday (25), the KBW regional bank index fell by less than 4%. That suggests investors are also more relaxed for now than they were when the SVB collapsed and triggered an industry-wide sell-off.

Shares of PacWest, which is expected to disclose after market close, fell 8% in mid-afternoon trading in New York. Like SVB and First Republic, the Los Angeles-based bank has strong ties to the tech industry.

The sell-off in First Republic stock followed a poorly received earnings call and an investor call on Monday night, during which executives declined to answer questions from analysts and withdrew financial guidance for the rest of the year.

First Republic has been looking for buyers for parts of its business for weeks but has struggled to build enthusiasm, with potential buyers citing concerns about taking too much risk, one of the people said.

Some private equity firms have expressed interest in acquiring some of First Republic’s assets, but the government is wary of the outlook on buyout firms benefiting from the recent bout of banking turmoil.

Translated by Luiz Roberto M. Gonçalves