First Republic Requests Assistance As Depositors Withdraw $70bn
First Republic Bank is seeking outside help to survive.
According to the Wall Street Journal (WSJ), the bank has hired financial advisor Lazard Ltd. to assess its options and McKinsey & Co. to develop a post-crisis strategy.
The article states that finding a buyer, selling stock, and other choices are difficult for the bank, whose depositors have removed $70 billion since Silicon Valley Bank failed, starting the crisis.
This week, Fitch Ratings and S&P Global downgraded First Republic, prompting rumors of a sale.
“The bank’s business position will suffer after the volatile swings in its stock price and heightened media attention surrounding deposit volatility,” wrote S&P analysts Nicholas Wetzel and Rian Pressman. “Its business stability has weakened as market perceptions of its creditworthiness have declined.”
One day after that news surfaced, 11 of the nation’s major financial institutions deposited $30 billion in uninsured money into First Republic to offer liquidity and express their confidence in the bank and industry.
“The actions of America’s largest banks reflect their confidence in the country’s banking system,” the banks, which included Wells Fargo, Citigroup and Bank of America, said in a news release last week.
We’re putting our financial power and liquidity into the system where it’s needed. Small and medium-sized banks serve local customers and businesses, create millions of jobs, and enhance communities.
S&P downgraded First Republic again on Sunday, saying the $30 billion should reduce near-term liquidity constraints, but it may not solve the substantial business, liquidity, funding, and profitability difficulties that we estimate the bank is now likely facing.
S&P believes attracting major deposits will be difficult, restricting the bank’s business position. More downgrades were possible.
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