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First Republic shares tumble again as liquidity worries linger; peers rebound

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

Shares of First Republic Bank (FRC.N) extended a recent slump on Monday with a 15% drop, after a report the regional bank could raise more money fanned worries about its liquidity despite a $30 billion rescue last week.

S&P Global downgraded the bank deeper into junk status on Sunday and said the recent cash infusion from 11 large U.S. banks may not solve its liquidity problems.

San Francisco-based First Republic is in talks to raise capital from other banks or private equity firms by issuing new shares and could also negotiate a deal to be sold, the New York Times reported late on Friday.

On Sunday, Reuters reported that the lender was still trying to put together a capital raise but that no deal was imminent.

“The market wants a more conclusive resolution for what’s going to happen to First Republic and the only way out of that is some sort of asset sale,” said Matt Orton, chief market strategist at Raymond James Investment Management.

First Republic’s shares have slid 80% over the past seven sessions on fears of a bank run as a large proportion of the lender’s deposits are uninsured.

Short sellers in First Republic made about $560 million profit on paper since last Monday, analytics firm Ortex said.

Meanwhile, shares of U.S. lenders largely rebounded on Monday in tandem with their European peers as UBS Group’s (UBSG.S) state-backed takeover of troubled peer Credit Suisse Group AG (CSGN.S) appeared to have allayed some worries.

The deal announcement “should both ease contagion fears but also meaningfully reduce the counter-party concerns for U.S. universal banks,” said KBW analyst David Konrad.

The S&P 1500 regional banks index (.SPCOMBNKS) added nearly 3.4%, while S&P 500 banks (.SPXBK) gained 2.3%.

PacWest Bankcorp (PACW.O) climbed 18% after the bank said deposit outflows had stabilized and its available cash of more than $10.8 billion exceeded total uninsured deposits.

“We have increased confidence that PACW can make it through this liquidity crunch now that it has enough cash to cover any additional run-off in uninsured deposits,” Matthew Clark, managing director at Piper Sandler & Co said in a note.

A U.S. official told Reuters on Sunday that the deposit outflows that left many regional banks reeling in the wake of Silicon Valley Bank’s failure had slowed and in some cases reversed.

New York Community Bancorp Inc (NYCB.N) added 39% as its unit entered into an agreement with U.S. regulators to buy deposits and loans from the shuttered New York-based Signature Bank.

Western Alliance Bancorp (WAL.N) gained 4%, while Zions Bancorp (ZION.O), Comerica Inc (CMA.N) and Fifth Third (FITB.O) and U.S. Bancorp (USB.N) added between 4.2% and 6.3%.

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