Record Low Share Prices and Government Intervention Reluctance
The bank's shares dropped 25% to $6.05, losing nearly half their value on Tuesday. CNBC reported that U.S. government officials were currently not willing to step in to help with First Republic's rescue efforts.
Exploring Options: Asset Sales and "Bad Bank" Creation
The bank has considered various options, such as selling assets or creating a "bad bank." A source familiar with the matter disclosed this information to Reuters on Tuesday.
Potential Purchasers and Balance Sheet Fixes
Advisers for the First Republic have already identified potential buyers of new stock in the lender, provided the bank can rectify its balance sheet issues, according to a report earlier on Wednesday.
Roadblocks and Challenges for First Republic's Rescue
Analysts have pointed out several obstacles that could hinder rescue attempts for the San Francisco-based lender as it tries to recover from a crisis caused by an outflow of over $100 billion in deposits in the first quarter.
Asset Sales at Severe Discounts
"The (First Republic) assets will be sold, but it may take some time and could be sold at a pretty severe discount to par," said David Wagner, portfolio manager at Aptus Capital Advisors.
Brokerages Cut Price Targets on First Republic Shares
At least three brokerages have reduced their price targets on First Republic's shares since the bank reported its first-quarter earnings on Monday.
A Painful Path Ahead for the First Republic
"First Republic's problems are likely idiosyncratic ... and they have a painful path in front of them," commented Art Hogan, chief market strategist at B Riley Wealth in Boston.
Regional Banks Face Pressure After First Republic's Results
Last week, earnings reports from regional banks initially reassured investors, but the banking sector has experienced renewed pressure following First Republic's results. The KBW Regional Banking index has lost 4.4% this week.
