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First Republic Bank stock recovers on reports of deal with big banks


A First Republic Bank branch is pictured in Midtown Manhattan in New York City, New York, U.S., March 13, 2023. REUTERS/Mike Segar

First Republic Bank’s (FRC.N) shares were up nearly 22% in afternoon trading on Thursday, erasing earlier losses after reports said several big U.S. banks were working out a deal to help the troubled California-based lender.

The bank’s stock was trading at $38 before trading was halted by the New York Stock Exchange.

Banks including JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N) are in talks with First Republic for a potential deal that could bolster its finances, the Wall Street Journal reported on Thursday.

First Republic could get up to $30 billion in deposits from the big banks in an effort orchestrated by the U.S. government, according to a report from Bloomberg News.

As fears of a banking crisis loomed large, the S&P 1500 regional banks sub-industry index (.SPCOMBNKS) slipped nearly 1% on Thursday, after tumbling more than 15% over the last four sessions.

“Short sellers are attacking banks they think are weak, unfortunately First Republic has not done a very good job of pushing back. So the hedge funds keep attacking,” said Christopher Whalen, chairman at Whalen Global Advisors.

Short sellers have likely raked in $3.53 billion for the month as of March 14, with the bulk of it coming from the rout earlier this week, according to data from research firm S3 Partners.

The regional banking sector has been reeling from the collapse of Silicon Valley Bank on worries that nervous customers may rush to withdraw their deposits, potentially triggering a liquidity crisis.

“Regional banks are more Plain Jane and they do a lot more mortgage business and credit deposit business than say what a Citigroup does,” said Brad Lamensdorf, co-portfolio manager of Ranger Equity Bear ETF.

“So when you’re looking at regional banks, this net interest margin situation is much more damning.”

The U.S. Federal Reserve is expected to raise its main lending rate by 25 basis points next week.

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