First Republic Bank considers strategic options, potential sale - Bloomberg

By Ambar Warrick

Investing.com -- Embattled U.S. lender First Republic Bank (NYSE:FRC) is exploring strategic options, including a potential sale as it faces a looming liquidity crunch, Bloomberg reported on Wednesday, citing sources close to the matter.

The bank is reportedly considering options to reinforce its liquidity position, and is expected to court interest from larger rivals, although no decision has been reached on the matter.

The news comes after the bank’s credit rating was sharply downgraded by S&P Global Ratings to “junk” status, while Moody’s said it was placing the bank under review for a potential downgrade.

Both agencies flagged growing risks of increased deposit withdrawals for the bank, and that it faces increased pressure on its profitability if it resorts to more expensive funding options than deposits.

Moody’s also placed Western Alliance Bancorporation (NYSE:WAL), Intrust Financial Corp, UMB Financial Corporation (NASDAQ:UMBF), Zions Bancorporation (NASDAQ:ZION) and Comerica Inc (NYSE:CMA) on review for potential downgrades. 

Shares of First Republic plummeted over 61% this week amid growing concerns that it will be the next domino to fall in a brewing U.S. banking crisis, which saw regional players including Silicon Valley Bank, Silvergate Capital Corp (NYSE:SI), and Signature Bank close operations due to a severe credit crunch.

First Republic faced a share rout on concerns over its reliance on uninsured deposits as funding, and also unrealized losses in its securities portfolios, which consists largely of long-dated bonds. 

SVB had faced a bank run over similar concerns, after the firm realized a $1.8 billion loss on asset sales as it rushed to meet a spike in deposits. 

Broader U.S. bank stocks were sold off heavily this week on fears of a potential contagion in the sector, even as the government intervened to restore faith in the banking sector. 

Fears of a collapse in Swiss bank Credit Suisse Group (SIX:CSGN) also drove a renewed rout in bank stocks on Wednesday. 

First Republic could not be immediately reached for comment.