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First Republic shares tumbled almost 33%, hurting other regional banks

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Persons are seen contained in the First Republic Bank branch in Midtown Manhattan in Latest York City, Latest York, U.S., March 13, 2023. REUTERS/Mike Segar

Mike Segar | Reuters

Shares of First Republic were under severe pressure Friday despite the beaten-down regional bank receiving aid from other financial institutions the day before.

On the market close, the stock was down 32.8%, the worst performer within the SPDR S&P Regional Banking ETF (KRE) — which dropped 6.0%. PacWest lost 19% and Western Alliance dropped 15%, while US Bancorp declined greater than 9%.

Those losses got here even after 11 other banks pledged to deposit $30 billion in First Republic as a vote of confidence in the corporate.

“This motion by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the group, which included Goldman Sachs, Morgan Stanley and Citigroup, said in a press release.

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First Republic Bank continued to crater on Friday.

There have been concerns that Thursday’s deposit infusion should still not be enough to shore up First Republic in the longer term.

Atlantic Equities downgraded First Republic to neutral, noting the bank may have a further $5 billion in capital. 

“Management is exploring different strategic options which can include a full sale or divestments of parts of the loan portfolio. The limited information provided implies that the balance sheet has increased substantially, which may perhaps necessitate a capital raise,” analyst John Heagerty wrote.

Meanwhile, Wedbush analysts put a $5 price goal on First Republic, saying that a takeover could wipe out most of its equity value.

“A distressed M&A sale could lead to minimal, if any, residual value to common equity holders owing to FRC’s significant negative tangible book value after considering fair value marks on its loans and securities.”

Late Friday, after the stock market closed, the Latest York Times reported that First Republic was in talks to boost capital by selling shares to other unnamed banks or private equity firms in a personal sale. Terms of the deal, as to the value of the shares, what number of and to whom, were still under discussion, and it was also possible that the complete bank could be sold, the Times said.

— CNBC’s Michael Bloom and Scott Schnipper contributed to this report.

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