First Republic shares crashed to their lowest price ever after the San Francisco-based bank’s stock slid yet again Monday, as reports of a possible sale or capital raise stoke fears First Republic’s already sinking market value may soon go the way of its worse-off peers and investors begin to lose faith in the $30 billion plan to rescue the bank.
First Republic’s stock fell 41% to $13.52 by 3 p.m. ET, sinking to as little as $11.52 amid multiple halts due to volatility, easily on pace for its lowest closing price ever and a whopping 89% decrease from a month prior.
Monday’s nosedive came after the Wall Street Journal reported JPMorgan Chase CEO Jamie Dimon is spearheading an effort to boost First Republic, with options including a sale or converting JPMorgan and other large banks’ $30 billion in uninsured deposits into an equity investment, while CNBC reported First Republic formally retained JPMorgan to advise the firm on potential paths forward, with a sale or a dilutive capital raise on the table.
A sale could spell disaster for First Republic shareholders if its terms come close to those of Credit Suisse, which was sold Sunday to rival UBS at a nearly 60% discount from its Friday share price.
Also weighing on First Republic stock was a Sunday credit downgrade from S&P Global ratings agency placing the bank further into junk territory, as the influx of billions in deposits from major banks is not a “longer-term solution to the bank’s funding issues.”
First Republic’s staggering losses came as the broader market gained, with the Dow Jones Industrial Average, S&P 500 and tech-heavy Nasdaq indexes each rising.
$70 billion. That’s how much deposits First Republic customers have withdrawn from the institution over the last few weeks, sources told the Wall Street Journal and New York Times. That amounts to roughly 40% of First Republic’s total deposits prior to the panic, according to its most recent quarterly earnings report.
The $30 billion in deposits First Republic received from 11 of the nation’s largest banks “ease immediate liquidity pressures” but don’t solve the bank’s “substantial long-term challenges,” S&P analyst Nciholas Wetzel wrote Sunday. “Attracting meaningful deposits will be difficult” for First Republic moving forward, Wetzel added, noting this will inevitably weigh on future profitably. constraining the bank’s business position.
Several of First Republic’s top-ranking executives sold $12 million in the company’s stock in the two months leading up to the bank’s crisis. The publicly disclosed sales came when First Republic shares traded upwards of $120, about 700% higher than its Monday share price.
What To Watch For
Sinking confidence in financial institutions may be the “unforeseen catalyst” which spells the “beginning of the end of the bear market as falling credit availability squeezes growth out of the economy,” Morgan Stanley analyst Michael Wilson wrote in a Monday note to clients.
10 Numbers And Charts That Sum Up March’s Banking Fiasco (Forbes)
Jamie Dimon Leading Efforts to Craft New First Republic Bank Rescue Plan (Wall Street Journal)
JPMorgan advising First Republic on strategic alternatives, including a capital raise, sources say (CNBC)
First Republic Stock Crashes But Bounces Back As Big Banks Unveil $30 Billion Rescue Plan (Forbes)