First Republic Bank Stock Slips Ahead of Fed Decision
Shares in the San Francisco-based bank plunged in after-hours trading Tuesday and were 3.6 % lower ahead of the open of trading Wednesday, in a sign that volatility that has slammed the bank may not be over. Shares closed 30% higher Tuesday, but had lost nearly 90% of their value since the start of the month.
The bank has hired advisors
(ticker: LAZ) and McKinsey & Co. as it explores options including a sale or trimming assets, a person familiar with the matter told Barron’s. News of Lazard’s involvement was reported earlier by The Wall Street Journal.
Wall Street CEOs and U.S. officials are exploring the possibility of government backing to secure a deal to shore up First Republic, Bloomberg reported late Tuesday.
In Europe,
offered to buy back €2.75 billion ($2.97 billion) worth of bonds it issued less than a week ago in light of its takeover of long-time rival
The Swiss bank said in a statement it was offering to repurchase the debt “as a result of a prudent assessment of these recent developments and the Issuer’s (UBS’s) long-term commitment to its credit investors.”
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UBS stock has rebounded more than 12% since before its Credit Suisse deal, and is now near the level it was trading at before Silicon Valley Bank collapsed earlier this month. After the shares fell nearly 20% early Monday, investors are perhaps starting to evaluate the acquisition as being a good thing for UBS.
First Republic stock (FRC) also fought back Tuesday, surging around 30% in regular trading hours after a report in the Journal that
(JPM) CEO Jamie Dimon was leading rescue talks. However, the shares remain close to 90% down since the beginning of March.
Comments by Treasury Secretary Janet Yellen also appeared to help ease fears, as she said “the situation is stabilizing,” at a banking conference. She also said the government could step in to protect depositors of other banks—as it did with Silicon Valley Bank and Signature Bank—if regulators see a risk of a run on the banking system.
Other regional bank stocks got a much-needed boost Tuesday after a prolonged period of pressure.
(PACW) stock rose 19%,
climbed 15% and
(KEY) closed 9% higher. The U.S. KBW Bank Index rose 5%–its best daily performance this year.
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As bank stocks continue to recover, investors will be closely watching the Fed later Wednesday as it discloses its next move on interest rates following a two-day meeting of its policy-setting committee. Expectations have fluctuated considerably over the past 10 days or so but interest-rate futures now indicate traders expect an increase of a quarter of a percentage point, according to the CME FedWatch tool.
“There’ll be plenty of focus on whether the Fed [will] hike today, but just as important will be how they’re looking at the current turmoil and whether they still expect any more rate hikes after today,”
analysts said early Wednesday.
Write to Callum Keown at callum.keown@barrons.com
