First Republic Pleads With Big Banks For Rescue. FRC Stock Keeps Tumbling

First Republic Bank is fighting for survival again after reporting a nearly 41% deposit flight in its first-quarter earnings beat Monday. FRC stock halved during in Tuesday trading and continued pushing new lows in Wednesday’s premarket action. Now, the San Francisco-based outfit is pleading for additional aid from other banks while it tries to shore up its balance sheet. Meanwhile regional firms took big hits as uncertainty in the financial sector continues.

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First Republic: Buy Now Or Pay Later

Heavily-battered First Republic Bank (FRC) deposits plummeted by $72 billion during the quarter to $104.5 billion as of March 31, even with the $30 billion injection from the biggest banks including JPMorgan Chase (JPM).

Deposit outflows stabilized somewhat in April, but dipped to $102.7 billion as of April 21.

First Republic is trying to persuade its previous rescuers to bail it out again with a buy now or pay more later pitch, CNBC reported Wednesday. The bank’s advisors are attempting to convince large institutions to buy bonds from First Republic at above-market rates for a few billion in losses, or face $30 billion in FDIC fees if First Republic fails.

If the big banks step up and take the hit, First Republic advisors are confident other parties will help recapitalize itself and already have buyers lined up for new FRC stock in that scenario.

Other Strategic Options

FRC stock crashed 49% to 8.10 on Tuesday on First Republic’s deposit flight and a Bloomberg report that the California bank is considering selling $50 billion to $100 billion in long-term securities and mortgages as part of its rescue strategy. Many of those securities have a market value that’s well below book value. First Republic can’t afford to sell those assets at market value.

The company is trying to reduce its asset-liability mismatch and shore up its balance sheet to avoid being seized by the FDIC. First Republic may offer potential buyers warrants or preferred equity as an incentive to purchase the assets above market value, Bloomberg reported, according to people familiar with the matter.

First Republic may also need the government’s help negotiating another injection from the largest banks to stabilize it during the attempted turnaround, Bloomberg reported.

In the earnings report, First Republic said it will cut 20%-25% of jobs in Q2 and is exploring strategic alternatives.

FRC Stock Dives, Regional Banks Jitter

FRC stock pushed new lows premarket Wednesday, tumbling as much as 30% in extremely volatile trading. Shares are currently down more than 10%.

The SPDR S&P Regional Banking ETF (KRE) fell 4.2% on Tuesday to the lowest since late 2020 as regional banks retreated. KeyCorp (KEY) and Zions (ZION) both fell more than 5% Tuesday but recovered slightly premarket Wednesday.

PacWest Bancorp (PACW) jumped 16% early Wednesday after reporting deposits increased to $28.2 billion by March 31 and climbed by another $700 million as of April 24. PacWest reported $27.1 billion in deposits in its March 20 investor update. PACW stock had tumbled nearly 9% Tuesday.

HomeStreet (HMST) fell another 7% premarket Wednesday after shares unraveled 35% in Tuesday trading.

Bitcoin rocketed 9% by early Wednesday near $29,800 from its $27,000 level prior to the First Republic news.

Meanwhile, the Federal Reserve and FDIC are scheduled to report updates on Signature Bank and SVB Friday morning.

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison

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