First Republic shares fall despite deposit infusion, dragging down other regional banks

First Republic shares fall despite deposit infusion, dragging down other regional banks

People are seen inside the Midtown Manhattan branch of First Republic Bank in New York City, New York, the United States, March 13, 2023. REUTERS/Mike Segar

Fresh Mike | Reuters

shares of First Republic were under pressure on Friday even though the ailing regional bank received help from other financial institutions.

As of 1:39 p.m. ET, the stock was down about 24% and was the year’s worst performer SPDR S&P Regional Banking ETF (KRE) – which declined 5.7%. PacWest And Western Alliance lost more than 15% each KeyCorp 8% slipped.

Those losses come even after 11 other banks pledged to pay $30 billion into First Republic as a vote of confidence in the company.

“This action by America’s largest banks reflects their trust in First Republic and in banks of all sizes, and demonstrates their deep commitment to helping banks serve their customers and communities,” said the group, which includes Goldman Sachs, Morgan Stanley and Citigroup include in a statement.

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The First Republic Bank collapsed further on Friday.

Of course, there were concerns that the infusion might not be enough to shore up First Republic going forward.

Atlantic Equities downgraded First Republic to neutral, noting that the bank may need $5 billion in additional capital.

“Management is evaluating various strategic options, which may include an outright sale or divestitures of portions of the loan portfolio. The limited information provided suggests that the balance sheet has increased significantly, which may well necessitate a capital increase,” wrote analyst John Heagerty.

Meanwhile, analysts at Wedbush have set a $5 price target for First Republic, stating that an acquisition could wipe out most of its stock value.

“A distressed M&A sale could result in minimal, if any, residual value for common stockholders due to FRC’s significant negative tangible book value after accounting for the fair value marks on its loans and securities.”

– CNBC’s Michael Bloom contributed to this report.

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2023-03-17 17:40:28