Stocks Soar On First Republic Bank Deal Talks

Stocks Soar On First Republic Bank Deal Talks

Update (1100ET): The Wall Street Journal reports that JPMorgan and Morgan Stanley are among a group in talks to bolster First Republic Bank.

According to people familiar with the matter, several large banks are discussing a potential deal with First Republic Bank that could include a sizable capital infusion to shore up the beleaguered lender.

Any deal would need the blessing of regulators and will be driven at least in part by the bank’s highly volatile stock.

FRC shares are bouncing hard off the earlier lows (halted numerous times)…

That headline sent the US Majors soaring…

*  *  *

As we detailed earlier, First Republic Bank shares have plunged this morning, extending a week-long rout, as executives consider courting a buyer to prop up the bank in the wake of the collapse of several regional peers.

Bloomberg reports that, according to people familiar with the matter, the San Francisco-based bank is said to be exploring strategic options that include a sale. The firm is also weighing options for shoring up liquidity, some of the people said.

“Normally, a headline of a potential sale would support the stock,” Christopher McGratty, an analyst at Keefe, Bruyette and Woods, wrote in a report.

“However, the potentially significant deposit outflows post-SIVB failure likely leave FRC in a tough spot.”

“Any potential sale would likely be a tough outcome for existing shareholders, given mark-to-market accounting on loans,” McGratty wrote.

FRC shares are down over 30% this morning, back at post-SVB lows…

First Republic saw its credit rating was cut to junk by S&P Global Ratings and Fitch Ratings.

First Republic’s options have narrowed following deposit outflow, a sharp share-price decline and recent downgrades from ratings agencies, while a potential sale of the bank could center on the attractive wealth-management business,” Herman Chan, an analyst at Bloomberg Intelligence, wrote in a note.

But, but, but President Biden said:

“Americans can rest assured that our banking system is safe.  Your deposits are safe.”

It’s not over.

Tyler Durden
Thu, 03/16/2023 – 10:59

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