First Republic Bank shares tumbled again on Friday, set for their worst week ever, as sentiment around the lender remained fragile even after proposals for $30 billion of aid from Wall Street’s biggest banks.
(Bloomberg) — First Republic Bank shares tumbled again on Friday, set for their worst week ever, as sentiment around the lender remained fragile even after proposals for $30 billion of aid from Wall Street’s biggest banks.
Shares of First Republic sank as much as 23% Friday, triggering at least one volatility halt, bringing its losses for the week to a record 68%. The drop comes after the bank reported that its borrowings from the US Federal Reserve varied from $20 billion to $109 billion from March 10 to March 15, said it was suspending dividend payments and disclosed a dwindling cash position.
“We find it difficult to come up with a realistic scenario where there’s residual value for First Republic common equity holders,” Wedbush analyst David Chiaverini wrote in a note to clients. Chiaverini downgraded the stock to neutral, cutting his price target to $5 from $140.
Atlantic Equities John Heagerty also downgraded First Republic to neutral citing “unprecedented uncertainty” surrounding the California lender. He said a return to prior leverage ratios for the bank “may well necessitate a capital raise.”
The renewed selling pressure follows a volatile session on Thursday, when the stock plunged as much as 36% before ending the day with a 10% gain after the biggest banks on Wall Street, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., pledged $30 billion of fresh cash for the lender.
Other regional banks are also down on Friday, with PacWest Bancorp falling as much as 15%, Western Alliance Bancorp dropping 12% and KeyCorp down 6%. Meanwhile, the SPDR S&P Regional Banking ETF fell as much as 4.4%.
Larger banks joined in the selloff, with Citigroup down 2.4%, Morgan Stanley dropping 1.9%, and Wells Fargo falling 3.5%. The KBW Bank Index fell 4%, set for its lowest close since November 2020.
Some investors questioned the move to aid First Republic. Pershing Square’s Bill Ackman for instance, said in a tweet that spreading the risk of financial contagion to achieve “a false sense of confidence” in the lender was “bad policy.”
First Republic’s shares have been hit hard by the turmoil in the banking sector, after the demise of three lenders knocked confidence in the industry and saw customers of regional lenders pull deposits. Silicon Valley Bank’s former parent company filed for chapter 11 bankruptcy on Friday. A meltdown in Credit Suisse Group AG’s shares on worries over the bank’s financial health further dampened sentiment.
(Updates with stock move, Wedbush and Atlantic Equities downgrades)
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