People are seen at 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 were under pressure on Friday despite the downed regional bank receiving support from other financial institutions.
At 1:39 p.m. ET, the stock was down about 24% and the worst performer in the SPDR S&P Regional Banking ETF (KRE) – which fell 5.7%. Pac West And Western Alliance also lost more than 15% each, while Key Corp dropped 8%.
Those losses come even after 11 other banks pledged to deposit $30 billion into 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 demonstrates their overall commitment to helping banks serve their customers and communities,” said the group, which includes Goldman Sachs, Morgan Stanley and Citigroup. in a statement.
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First Republic Bank continued to crater on Friday.
Naturally, there were concerns that the infusion might not be enough to sustain First Republic going forward.
Atlantic Equities downgraded First Republic’s rating to neutral, noting that the bank may need an additional $5 billion in capital.
“Management is exploring several strategic options, including a full sale or divestment of parts of the loan portfolio. The limited information provided implies that the balance sheet has grown significantly, which may necessitate a capital increase,” wrote analyst John Heagerty.
Meanwhile, Wedbush analysts put a $5 price target on First Republic and said a takeover could wipe out most of its equity value.
“A distressed M&A sale could result in minimal or no residual value to holders of common stock because of FRC’s significant negative tangible book value, taking into account the fair value markings on its loans and securities.”
– CNBC’s Michael Bloom contributed to this report.