![]() ![]() Going into receivership can have significant consequences for the bank’s customers, shareholders, and employees, as well as for the wider financial system. When a struggling bank goes into receivership it means that a regulatory authority or government agency takes control of the bank and its assets, usually with the goal of liquidating the bank’s assets to repay its creditors. The biggest fear that investors have is that First Republic goes into receivership, said Chiaverini. Other reports say that First Republic is considering asking big banks to help with such a deal. First Republic declined to comment to CNN on the story. “They’re willing to take that sort of risk, whereas the big banks aren’t in the business of purchasing preferred equity in in other banks.”īloomberg reported Tuesday that the lender is looking to sell as much as $100 billion of its loans and securities in a bid to balance its books. “Private equity would be a more likely buyer and participant in that sort of transaction,” he said. “We suppose that isn’t completely far fetched, though we have a hard time imagining Jamie Dimon or Brian Moynihan or Jane Fraser each agreeing to buy $5 billion of mortgages and Treasuries for prices that are well above the market,” he added.Įither way, private equity could still swoop in and save the day, said Chiaverini. Investors who are buying First Republic stock are clinging to the hope “that a bailout package spearheaded by the largest US banks will leave something left for equity holders,” wrote Bilson. It essentially comes down to impact analysis for banks: Pay a few billion dollars now or a few more billion dollars later. There are storm clouds ahead for the economy, JPMorgan Chase CEO says JPMorgan Chase CEO Jamie Dimon speaks during an interview with CNN's Poppy Harlow in Atlanta, Georgia, on April 6, 2023. Earlier in March, JPMorgan also extended a $70 billion line of credit to First Republic. That’s on top of $30 billion in bailouts led by JPMorgan Chase last month. That will cost a pretty penny and will be funded mostly by large banks, costing them tens of billions of dollars. If First Republic fails, the FDIC will likely want to avoid systemic risk and offer insurance to all depositors, even those without insurance. First Republic’s bonds maturing in 2046 are currently trading at just 43 cents on the dollar.īut big banks find themselves between a rock and a hard place. That’s a hard sell, said Chiaverini, since those assets would probably sell for well above market rate. In exchange, the buyer would receive a preferred equity interest in the company. The second option, said Chiaverini, would be to try to sell some of its loans and securities at the same cost they bought them for. Option two: Appeal to big banks (or private equity) The lender, he said, had twice the available liquidity of uninsured deposits (excluding the $30 billion received from large banks). “That’ll be a long road, but they do have some liquidity that will enable them to continue,” said Chiaverini.įirst Republic CEO Michael Roffler attempted to assure investors in an earnings call Monday that the bank had enough liquidity to do that. (FRC) stays the course and “muddles along as a standalone company.” That would mean waiting for its securities and loans to mature. The company noted that it is “taking actions to strengthen its business and restructure its balance sheet.”ĭavid Chiaverini, managing director of equity research at Wedbush Securities, told CNN there are just three viable options left. (Photo by Spencer Platt/Getty Images) Spencer Platt/Getty Imagesįirst Republic stocks drops nearly 50% after plunge in depositsįirst Republic said in its latest earnings call that is exploring its strategic options, Wall Street code for searching for a white knight. bank will reveal its latest financial results but concerns over small and medium-sized banks persist following the collapse of Silicon Valley Bank (SVB) in March. NEW YORK, NEW YORK - APRIL 24: A person walks past a First Republic bank branch in Manhattan on Apin New York City. ![]()
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