First Republic shares fall on fresh liquidity fears
STORY: Shares of First Republic Bank plummeted as much as 50% on Monday, deepening recent losses as investors feared the $30 billion pumped into the troubled lender last week by several big U.S. banks might not be enough to keep it afloat.
S&P Global downgraded First Republic deeper into junk status this week and said the recent cash infusion from 11 large banks may not solve its liquidity problems.
A report from the Wall Street Journal said JPMorgan Chase CEO Jamie Dimon is leading talks with the heads of other big banks about fresh efforts to stabilize First Republic.
Anna Rathbun is chief investment officer at CBIZ Investment Advisory Services.
"What has happened is that the $30 billion injection is just an injection. It has not actually added any equity to the banking balance sheet. So what the investors are afraid of is, okay, we now have the short-term solution, but it's not a long-term solution and equities are actually a long-term instrument. And so when the markets look far out, they're thinking what next? Certainly any big bank, any large bank could buy First Republic. It doesn't have to be JPMorgan. JPMorgan could do it. I'm not entirely sure that JPMorgan would have the appetite to take in First Republic. They may have to divide it up. It might not be one bank that buys it. It might be sliced and diced. We don't know that yet. I'm sure that that is not the desirable situation for First Republic, but that is what is on the line."
A wave of withdrawals had hit the San Francisco-based bank after the collapse of Silicon Valley Bank earlier this month.
As fears persist, First Republic's shares have fallen more than 80% in the past 10 trading sessions.
The New York Times reported late last week that First Republic is in talks to raise capital from other banks or private equity firms by issuing new shares and could also negotiate a deal to be sold.
On Sunday, Reuters reported that First Republic was still trying to put together a capital raise but that no deal was imminent.