First Republic rebounds from record low with aid plan in focus

FIRST Republic Bank rallied after closing at a record low on Monday, as JPMorgan charted out a new plan to help the firm.

The stock jumped as much as 33 per cent to US$16.16 with fellow regional lenders including Western Alliance Bancorp and PacWest Bancorp also rising. The KBW Regional Banking Index is higher by as much as 5.5 per cent, boosted by a broad rally across the sector.

JPMorgan chief executive officer Jamie Dimon hatched a new plan to aid First Republic, Bloomberg News reported on Monday, citing people familiar with the situation. Under the plan, some or all of the US$30 billion in deposits that a group of US banks injected would be converted into a capital infusion for the California lender.

A potential conversion “could add much needed stability and is another vote of confidence for the embroiled lender,” Bloomberg Intelligence analyst Herman Chan wrote. 

The rally follows a broad recovery in the banking sector across Europe and the US, as contagion concerns ease following UBS’ rescue deal for Swiss lender Credit Suisse.

Still, investor confidence in First Republic has waned after the lender was downgraded again Sunday by S&P Global, days after the ratings firm cut the lender to junk. First Republic’s share price slumped in the past two weeks as depositors pulled back money after the failure of Silicon Valley Bank dented sentiment. 

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First Republic shares tumble again as liquidity worries linger

The bounce leaves the stock down about 86 per cent from its price before the SVB news came out.

Major Wall Street lenders are joining in on the Tuesday rally, with Citigroup, Wells Fargo and Bank of America all rising more than 3 per cent each.

US officials are mulling ways they could temporarily expand Federal Deposit Insurance Corp coverage to all deposits if the crisis grows, Bloomberg News reported, citing people with knowledge of the talks. BLOOMBERG