First Republic shares hit record low after report says government unwilling to intervene

FIRST Republic Bank’s shares hit a record low on Wednesday (Apr 26) after a report said the US government was unwilling to intervene in the rescue process, adding to concerns about the troubled lender’s plans to turn around its business.

The company’s shares were last down 25 per cent at US$6.05, after losing nearly half of their value on Tuesday.

US government officials were currently unwilling to intervene in the First Republic rescue process, CNBC reported, citing sources.

The bank has been looking at several options, such as selling assets or the creation of a “bad bank”, a source familiar with the matter told Reuters on Tuesday.

First Republic’s advisers have already lined up potential purchasers of new stock in the lender if they can fix the bank’s balance sheet, a report earlier on Wednesday said.

However, analysts have highlighted several roadblocks which could complicate rescue efforts for the San Francisco-based lender as it looks to emerge out of the crisis sparked by an outflow of more than US$100 billion in deposits in the first quarter.

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“The (First Republic) assets will be sold, but it may take some time and could be sold at a pretty severe discount to par,” David Wagner, portfolio manager at Aptus Capital Advisors, said.

At least three brokerages have cut their price targets on First Republic’s shares since it reported first-quarter earnings on Monday.

“First Republic’s problems are likely idiosyncratic ... and they obviously have a painful path in front of them,” Art Hogan, chief market strategist at B Riley Wealth in Boston, said.

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A string of earnings reports from regional banks last week had reassured investors, but the banking sector has come under renewed pressure following First Republic’s results.

The KBW Regional Banking index has lost 4.4 per cent so far this week. REUTERS