By Niket Nishant
(Reuters) – First Republic Bank’s market value plunged below $1 billion for the first time ever on Wednesday after a report said the U.S. government was unwilling to intervene in the rescue process, hammering the lender’s stock.
After a brutal selloff, the bank’s market capitalization was about $886 million at its lowest on Wednesday, a far cry from its peak of more than $40 billion in November 2021.
U.S. government officials are currently unwilling to intervene in the First Republic rescue process, CNBC reported, citing sources.
The bank has been looking at several options, such as selling assets or the creation of a “bad bank”, a source familiar with the matter told Reuters on Tuesday.
The bad bank possibility is a crisis-type method of isolating financial assets that have problems.
Trading in First Republic’s shares were halted multiple times. The stock was last down nearly 30% at $5.66.
GRAPHIC: First Republic Bank strained after crisis https://www.reuters.com/graphics/GLOBAL-BANKS/egpbyqqjyvq/chart.png
First Republic’s advisers have already lined up potential purchasers of new stock in the lender if they can fix the bank’s balance sheet, a report earlier on Wednesday said.
However, analysts have highlighted several roadblocks which could complicate rescue efforts for the San Francisco-based lender as it looks to emerge out of the crisis sparked by an outflow of more than $100 billion in deposits in the first quarter.
“The (First Republic) assets will be sold, but it may take some time and could be sold at a pretty severe discount to par,” David Wagner, portfolio manager at Aptus Capital Advisors, said.
At least three brokerages have cut their price targets on First Republic’s shares since it reported first-quarter earnings on Monday.
“First Republic’s problems are likely idiosyncratic … and they obviously have a painful path in front of them,” Art Hogan, chief market strategist at B Riley Wealth in Boston, said.
A string of earnings reports from regional banks last week had reassured investors, but the banking sector has come under renewed pressure following First Republic’s results.
The KBW Regional Banking index has lost 4.4% so far this week.
(Reporting by Niket Nishant, Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)