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First Republic Bank shares wavered amid reports that industry leaders and U.S. officials discussing an intervention for the California lender are exploring the possibility of government backing to encourage a deal.
The bank’s shares fell 1.4 percent Wednesday after tumbling more than 10 percent in premarket trading and ending Tuesday’s regular session with a nearly 30-percent bounce. Its stock price has fallen by 87 percent from a month ago despite sweeping efforts, coordinated by the Biden administration and backed by the nation’s biggest banks, to restore investor confidence.
First Republic is among a cadre of regional financial institutions that have been swept up in broader stock market jitters after the collapse of Silicon Valley Bank and Signature Bank in early March.
Uncertainty swirls around First Republic even as bank leaders insist that liquidity remains “very strong.” The ratings agencies S&P and Moody’s both downgraded First Republic’s credit, citing liquidity problems and a heavy reliance on short-term debt. Last week, 11 of the nation’s largest banks announced that they would deposit a total of $30 billion into First Republic.
Now, according to a Bloomberg News report, Wall Street leaders and U.S. officials discussing an intervention are exploring the possibility of government backing to seal a deal. The report, citing people with knowledge of the situation, included several possible roles for the government, including lifting some of the assets that have eroded First Republic’s balance sheet or offering liability protection.
Various media reports have hinted that more aggressive action is being considered to prevent another bank failure. The Wall Street Journal reported Wednesday that the bank had turned to Lazard Ltd. and McKinsey & Co. to help review possible options, which could include a sale, additional capital infusion or some form of asset trimming.
This story is developing and will be updated.
Source link: https://www.washingtonpost.com/business/2023/03/22/first-republic-bank-rescue/