First Republic Bank shares hit new lows on report that government is reluctant to intervene

  • For the second day in a row, the stock market hit record lows
  • The US government is reportedly reluctant to intervene in the recovery process
  • Analysts worry about the bank’s dwindling options

April 26 (Reuters) – The market value of Republic Bank ( FRC.N ) fell below $1 billion on Wednesday after a report said the U.S. government did not want to intervene in the bailout process, hammering the lender’s shares.

After a brutal selloff, the bank’s market capitalization hit an all-time low of $886 million on Wednesday, a far cry from its peak of $40 billion in November 2021.

US government officials currently do not want to interfere in the First Republic recovery process, CNBC reported reportedCiting sources.

A source familiar with the matter told Reuters on Tuesday that the bank was looking at several options, including selling assets or creating a “bad bank”.

Bad bank potential is a crisis type method of isolating troubled financial assets.

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

Reuters Graphics
A trader works on the trading floor of First Republic Bank stock on the floor of the New York Stock Exchange (NYSE) on March 16, 2023 in New York City. REUTERS/Brendan McDermid/File Photo

First Republic’s advisers have already lined up buyers for new shares in the lender if it can fix the bank’s balance sheet. Report said earlier on Wednesday.

Analysts, however, have highlighted several roadblocks that could complicate the San Francisco-based lender’s recovery efforts as it emerges from a crisis fueled by more than $100 billion in deposits in the first quarter.

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

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

“The problems of the First Republic are unique … and they obviously have a painful trajectory,” said Art Hogan, chief market strategist at B Riley Wealth in Boston.

Earnings reports from regional banks last week reassured investors, but the banking sector is under renewed pressure following the results of the First Republic.

The KBW Regional Bank Index (.KRX) has lost 4.4% so far this week.

Niketh Nishant reports in Bangalore; Editing by Shaunak Dasgupta

Our Standards: Thomson Reuters Trust Principles.

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