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First Republic shares recover slightly after Yellen comments cause sharp drop

Investing.com
·2-min read

By Scott Kanowsky

Investing.com -- First Republic Bank (NYSE:FRC) shares moved higher in U.S. premarket trading on Thursday, clawing back some losses from a sharp decline in the prior session that was sparked in part by comments from Treasury Secretary Janet Yellen.

Speaking in a Senate hearing, Yellen said that she is not eyeing plans to guarantee all bank deposits, tempering some investor predictions over how much U.S. officials would intervene to secure uninsured deposits in beleaguered regional lenders.

Shares in First Republic, as well as embattled California-based peer PacWest Bancorp (NASDAQ:PACW), both saw double-digit losses on Wednesday following Yellen's statement, which ate into hopes that guarantees offered to depositors of failed Silicon Valley Bank could be replicated to smaller banks. Holdings in First Republic have shed 90% of their value since March 3.

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First Republic has come under scrutiny since the collapse of SVB and Signature Bank earlier this month led to bank runs that have cut into deposits. Concerns have particularly swirled around the fact that about two-thirds of its deposits were in accounts that were above the $250,000 protection limit set by the Federal Deposit Insurance Corporation.

Analysts have flagged concerns over First Republic's strategic options. Leaders in Washington and executives on Wall Street have reportedly been considering the possibility of providing a government backstop to the bank, according to Bloomberg News, citing people familiar with the situation.

The Financial Times also reported that First Republic has brought on investment bank Lazard (NYSE:LAZ) to help advise on a possible sale, capital injection or asset offloading.

In a note to clients, analysts at Wolfe Research described First Republic's position as "between Scylla and Charybdis."

"A sale is still possible, but limited buyer interest to date and eroding franchise value are constraints," the Wolfe analysts said.

They added that while placing new equity into the business and cleaning up its balance sheet through the sale of underwater loans and securities could be viable options, such a move "would likely wipe out the value of existing equity."

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