Shares of First Republic Bank fell again on Wednesday as investors remained skeptical that the San Francisco-based bank could complete a turnaround.
Shares of First Republic (ticker: FRC) dived as much as 17% in early trading on Wednesday as reports emerged about the bank’s efforts to avoid collapse. On Tuesday, the stock fell 49% to close at a record low, after the bank said Monday its deposits fell more than 40% in the first quarter and revealed plans to cut up to 25% of its workforce this.
First Republic is considering asking banks involved in its $30 billion rescue package last month, including JPMorgan Chase (JPM), to buy bonds from the bank at above-market rates, according to a report by CNBC cited banks familiar with the proposal. While losses from such bond purchases would run into several billion dollars, these banks could face about $30 billion in losses in the case of a collapse, according to the report.
First Republic and JPMorgan did not immediately respond to a request for comment.
First Republic is also looking to sell $50 billion to $100 billion in assets to shrink its balance sheet, Bloomberg reported Tuesday.
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Monday’s report on the first quarter exodus of deposits from First Republic rekindled market jitters that plagued regional banks in March after Silicon Valley Bank and Signature Bank (SBNY) failed. Although calm was restored after the Federal Reserve created a new tool to give banks more liquidity last month—and larger lenders led by JPMorgan Chase added deposits to First Republic—the latest disclosures has rekindled confidence in the sector.
Other regional banks now appear to be benefiting from First Republic withdrawals. PacWest Bancorp (PACW) stock jumped 13% on Wednesday after the bank said it increased its deposit balance by $1.8 billion in recent weeks. Western Alliance (WAL) rose 1% in early trade; it said last week that inflows had increased.
Other regional lenders, which had been dragged down by First Republic’s stock on concerns about contagion, were less buoyant. Zions Bancorp (ZION) rose 0.4% and KeyCorp (KEY) climbed 1.4% on Wednesday.
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Write to Brian Swint at brian.swint@barrons.com
