First Republic Shares Drop Anew as Unease Lingers Even With Aid

(Bloomberg) — First Republic Bank shares slid during after-market trading amid concern its crisis is far from over despite efforts of larger banks to restore confidence by agreeing to add $30 billion of deposits to the lender.

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Share-price volatility continued after First Republic suspended its dividend payments, disclosed a dwindling cash position before the rescue package and said it borrowed billions from the Federal Reserve over the past week. The stock sank 17% in post-market trading, following a 10% gain during the regular session.

Nearly a dozen larger banks, including JPMorgan Chase & Co. and Citigroup Inc., banded together in a show of support for First Republic on Thursday at the suggestion of Treasury Secretary Janet Yellen. While the rescue attempt helped boost sentiment across global markets, billionaire investor Bill Ackman was among those questioning whether it would be enough to halt the crisis.

The move spreads the risk of financial contagion to bigger banks, achieves “a false sense of confidence” and is “bad policy,” Ackman, the founder of investment firm Pershing Square, said in a tweet.

First Republic’s jump during regular trading hours on Thursday had made one of the top performers in the SPDR S&P Regional Banking ETF.

In a statement after the official close of US exchanges, First Republic said its borrowings from the Fed varied from $20 billion to $109 billion from March 10 to March 15. The bank said it had a cash position of approximately $34 billion on March 15; it had reported $70 billion of unused liquidity on March 12.

“With the new funds being added at market rates, we expect earnings will be revised notably downward for the coming quarters,” Andrew Liesch, an analyst at Piper Sandler who holds a neutral rating on First Republic, wrote in a note. “We think this will serve as a headwind to the stock in the near-term, as much of the bank’s earning assets are tied to fixed rates and have below-market yields with limited repricing benefits on the horizon.”

Read more: Banks Toss First Republic Lifeline With Yellen, Dimon’s Cajoling

First Republic specializes in private banking and wealth management, and has tried to differentiate itself from Silicon Valley Bank, the tech-focused lender that collapsed earlier this month and sent shockwaves across the financial industry. Investors in the sector are on tenterhooks amid the upheaval in US regional lenders as well as the tumult surrounding Credit Suisse Group AG.

–With assistance from Maxwell Zeff and Naoto Hosoda.

(Updates with after-market price move in second paragraph, adds Bill Ackman from third paragraph.)