David Paul Morris/Bloomberg
First Republic Bank shares plunged in premarket trading on Thursday, extending a weeklong rout as executives consider courting a buyer to prop up the bank in the wake of the collapse of several regional peers.
The stock fell as much as 39%, extending a slide that had already erased more than $17 billion off its market capitalization this month. The move comes as the San Francisco-based bank is said to be exploring strategic options that include a sale, according to people familiar with the matter. The firm is also weighing options for shoring up liquidity, some of the people said.
As of 9:50 a.m., the stock was trading at $21.23, down nearly 32% from Thursday’s close.
“Normally, a headline of a potential sale would support the stock,” Christopher McGratty, an analyst at Keefe, Bruyette and Woods, wrote in a report. “However, the potentially significant deposit outflows post-SIVB failure likely leave [First Republic] in a tough spot.”
“Any potential sale would likely be a tough outcome for existing shareholders, given mark-to-market accounting on loans,” McGratty wrote.
Investors across the banking space are on tenterhooks amid the upheaval in U.S. regional lenders as well as the tumult surrounding Credit Suisse Group AG. Shares of the Swiss bank rebounded Thursday after it opened a $54 billion line of credit with the country’s central bank and offered to buy back debt.
On Wednesday, First Republic shares sank 21% as its credit rating was cut to junk by S&P Global Ratings and Fitch Ratings. The bank said Sunday that its total available unused liquidity to fund operations was more than $70 billion, from agreements that included the Federal Reserve and JPMorgan Chase.
First Republic specializes in private banking and wealth management, and has tried to differentiate itself from Silicon Valley Bank. Several regional bank peers were down in premarket trading as well. PacWest Bancorp dropped 17% as of 8:20 a.m. Eastern time, and Western Alliance Bancorp slid 10%.
“First Republic’s options have narrowed following deposit outflow, a sharp share-price decline and recent downgrades from ratings agencies, while a potential sale of the bank could center on the attractive wealth-management business,” Herman Chan, an analyst at Bloomberg Intelligence, wrote in a note.
