
By Scott Kanowsky
Investing.com -- Shares in First Republic Bank (NYSE:FRC) shed nearly a fourth of their value on Friday as analysts warned of financial pains ahead for the regional lender despite a $30 billion deposit from some of the biggest U.S. banks.
JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) each chipped in $5B in uninsured deposits following reported discussions between top banking executives and regulators in Washington. Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) both kicked in $2.5B, while five other banks also contributed $1B each.
The U.S. Treasury Department, Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency all backed the additional deposits, saying in a joint statement that the rescue signals the "resilience of the banking system."
But even with the cash infusion, San Francisco-based First Republic said it would still suspend its dividend and focus on bringing down the size and composition of its balance sheet.
Meanwhile, analysts at Wedbush lowered their rating of First Republic to Neutral from Outperform and slashed their share price target to $5 from $140, flagging that it is "difficult to come up with a realistic scenario where there's residual value for [First Republic] common equity holders."
“We estimate that the combined actions taken on the liability side of the balance sheet over the last week to shore up liquidity could increase interest expense materially, and puts the bank in a very tough position from a profitability standpoint, thus making a sale the best option to avoid receivership, in our view,” the Wedbush analysts wrote.
Begin trading today! Create an account by completing our form
At One Financial Markets we are committed to safeguarding your privacy.
Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.
Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.
Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.
By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.