Shares in First Republic Bank plunged another 27% in premarket trading Thursday amid reports it is reviewing its strategic options, including a possible sale of the company. The move came as other bank stocks regained their footing after heavy losses on Wednesday.
Bloomberg reported late Wednesday that San Francisco-based bank First Republic is looking at ways to increase its liquidity and that the bank is likely to attract interest from larger rivals.
A spokesman for First Republic declined to comment to MarketWatch on a potential sale.
First Republic shares fell Thursday as the banking sector received a boost from Credit Suisse CS,
which said it would borrow nearly $54 billion from the Swiss central bank to “preventively bolster its liquidity.”
Also read: Credit Suisse shares surge after announcing plans to borrow money and buy back debt from the SNB
First Republic stock has lost nearly two-thirds of its value over the past week, in part because it serves some of the same individuals and customers in the Silicon Valley banking universe of venture capital and private equity firms that Silicon Valley does Bank SIVB can be served.
which failed last week.
Investors then viewed First Republic as the next domino likely to fall, and the stock fell sharply.
Adding to the worries, S&P Global Ratings and Fitch Ratings on Wednesday downgraded the First Republic’s debt to junk bond territory over concerns about deposits fleeing to larger banks deemed safer.
See more: First Republic Bank has been downgraded to junk by S&P and Fitch amid fears further deposit flight will hurt profitability
A JP Morgan analyst said early Thursday that retailers sold about $88 million worth of First Republic single-stock ETFs over the past week, accounting for most of the $163 million in financial ETFs, squandered by these investors. About $104 million of that came from local banks.
First Republic stock is down 82% over the past 12 months, while the S&P 500 SPX,
has fallen by 10.7%.
On Sunday, First Republic said it had strengthened its financial position with “additional liquidity” from the Federal Reserve and JPMorgan Chase & Co. JPM,
giving it more than $70 billion in untapped liquidity.
Odeon Capital banking analyst Richard Bove told MarketWatch on Wednesday that the First Republic’s debt downgrade was “quite shocking” for the company as it would increase borrowing costs and raise questions about the company’s health.
But the company’s line of credit at JPMorgan Chase and a close eye from federal regulators will keep the bank healthy, Bove said.
“Is the company in big trouble? No,” Bove said. “I don’t think the US government will allow it.”
However, the bank has some weaknesses, such as B. A large number of investments in fixed-yield mortgage-backed securities while the cost of holding deposits increases, he said.
Also read: Regional and large bank stocks falter amid growing fears of a banking crisis
Source : www.marketwatch.com