First Republic Selloff Continues Despite Help From Big Banks

Shares of First Republic Bank (FRC:US) are trading about 75% lower in March as the bank fights for its life following the collapse of the Silicon Valley Bank (SIVB:US).

Amid liquidity concerns, First Republic received a historic $30 billion lifeline from major U.S. banks, including JPMorgan Chase (JPM:US), Bank of America (BAC:US), Wells Fargo (WFC:US) and Citigroup (C:US).

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” the Treasury Department said in a statement Thursday.

Large banks were flooded by deposits this week as depositors moved their funds from smaller, regional banks to those that are much more capitalized, like JPMorgan for instance. 

Investors will now hope that the $30 billion infusion will be enough for the First Republic to sustain its daily operations and meet customer withdrawals. Long-term investors will hope that the bank will be able to improve its fragile confidence and reputation and see deposits come back after the dust settles.

On Wednesday, both Fitch and S&P downgraded the bank’s credit rating. S&P noted an extremely high liability-to-deposit ratio, which practically means that FRC lent out more money than it has deposits.

Given the massive selloff in FRC shares, investors will be now facing a dilemma: use any rebound in stock to get out and limit losses or play the long recovery game and risk default.
Congress members like Ro Khanna, Lois Frankel and John Curtis were all buying FRC shares last year while they were trading easily above the $100 handle. The stock is trading below $30 apiece on Friday.