First Republic extends route as bank is asked to weigh options

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(Bloomberg) — Shares of First Republic Bank declined in premarket trading Thursday, extending a week-long rout as executives considered calling for a buyer to run the bank in the wake of the collapse of several regional peers .

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The stock plunged as much as 39%, extending a slide that had already erased more than $17 billion from its market capitalization this month. The San Francisco-based bank is exploring strategic options that could include a sale, according to people familiar with the matter. Some said the firm is also weighing options to shore up liquidity.

“Generally, a headline of a potential selloff would support the stock,” Christopher McGratty, an analyst at Keefe, Bruyette & Woods, wrote in a report. “However, the potentially significant deposit outflow after the SIVB failure leaves the FRC in a tough spot.”

McGratty wrote, “Any potential sale would likely have a difficult outcome for existing shareholders, given mark-to-market accounting on the debt.”

Banking sector investors are on tenterhooks amid turmoil at US regional lenders as well as the uproar surrounding Group AG. Shares of the Swiss bank soared on Thursday after the country’s central bank opened a $54 billion credit line and offered to buy back debt.

Shares of First Republic plunged 21% on Wednesday after its credit was downgraded to junk by S&P Global Ratings and Fitch Ratings. The bank said on Sunday that its total available unused liquidity to fund operations from agreements including the Federal Reserve and JPMorgan Chase & Co was more than $70 billion.

First Republic specializes in private banking and wealth management, and has tried to differentiate itself from Silicon Valley banks. Several regional bank peers were also down in premarket trading. PacWest Bancorp fell 17% as of 8:20 a.m. New York time, and Western Alliance Bancorp fell 10%.

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“Deposit outflows, a sharp share-price and recent downgrades from agencies have narrowed First Republic’s options while the bank’s potential sale focuses on its lucrative wealth-management business,” said Herman Chan, an analyst with Bloomberg Intelligence. Might.” Wrote in a note.

(Update adds business, comment and context.)

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