Beautiful Virgin Islands


First Republic shares fall as Yellen says not considering 'blanket insurance' on bank deposits

First Republic shares fall as Yellen says not considering 'blanket insurance' on bank deposits

A "bull case" scenario for the shares of beleaguered First Republic Bank (FRC.N) as it considers its options became more difficult on Wednesday after Treasury Secretary Janet Yellen said there is no discussion on insurance for all bank deposits without approval from the U.S. Congress.
First Republic, whose shares have lost much of their value since the banking crisis started in the U.S. on March 8, is among banks speaking to peers and investment firms about potential deals in the wake of U.S. regulators' taking over Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O) following bank runs.

Morgan Stanley analyst Manan Gosalia, in a report earlier this week, set a target price of $54 for First Republic shares in a best-case scenario. The stock on Wednesday closed at $13.33, down 15.5% The optimistic case was based on a scenario in which the Federal Deposit Insurance Corp (FDIC) insures all consumer deposits through the end of the banking crisis, triggering a return of the majority of customer deposits, according to the report.

That hope was reduced on Wednesday, after Yellen told a hearing of the U.S. Senate's Appropriations Subcommittee on Financial Services that she was not considering such a move without congressional approval and was reviewing bank risks on a case-by-case basis.

"I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits," she said.

On Tuesday, she said the Treasury and regulators had a "resolute commitment" to safeguard deposits of smaller institutions, including community banks.

Her latest remarks affected all regional bank stocks, said R.J. Grant, head of trading at Keefe, Bruyette & Woods.

"Yellen struck a different tone for sure. There was this feeling that there was behind-the-scenes talks in Washington that depositors would be protected," Grant said.

JPMorgan (JPM.N) Chief Executive Jamie Dimon met with Lael Brainard, director of the White House's National Economic Council, on Wednesday during a planned trip to Washington, according to a person familiar with the situation. The meeting agenda was unclear. It came as First Republic's efforts to secure a capital infusion continued.

The Morgan Stanley report considered that a potential extension of FDIC insurance could bring a majority of First Republic's customers back. Banks involved in First Republic's rescue negotiations are asking for a loss-sharing arrangement with the U.S. government similar to the terms agreed by Switzerland's UBS Group (UBSG.S) in its emergency takeover of rival Credit Suisse (CSGN.S) , according to an industry source.

The acquirer would receive support if after buying First Republic it finds a larger loss than expected, added the source, who requested anonymity to disclose private conversations.

First Republic declined to comment.

The bank is looking at ways it can downsize if attempts to raise new capital fail, Reuters reported on Tuesday, citing three people familiar with the matter.

Even if it clinches a cash infusion, the lender will probably need to take losses on securities in its so-called held-to-maturity portfolio, the Morgan Stanley analysts wrote.

A potential buyer would need to absorb $26.8 billion in mark-to-market losses from First Republic's loan and securities portfolios, while an extra $9.5 billion is needed to recapitalize the bank, the Morgan Stanley analysts estimated.

In the worst-case scenario, First Republic's shares would sink to just $1, Morgan Stanley analysts estimated.

Citigroup withdrew its estimates for First Republic on Tuesday and put the stock under review. Analysts Arren Cyganovich and Kaili Wang said in a report that "some form of government intervention seems increasingly likely, albeit in what form remains unclear."
Comments

Oh ya 2 year ago
Let the failing banks collapse, bad decisions from bank management is not the responsibility of the taxpayers. The banks that think that the government will always bail them out then they will continue with their risky investments

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Prince William to End Feudal Land Restrictions in Duchy of Cornwall, but Controversies Remain
British police appear unprepared to deal with usual suspects
Russia's Ballistic Blitz on Kyiv Sends Shockwaves Through Global Stability
Multiple Tragedies and Tensions Mark Global Events: A Closer Look
Elon Musk's AfD Endorsement Ignites Controversy from neo-Nazis who accuse the AfD of being what they themselves are
Ukraine Claims Unprecedented Russian Losses: The Truth Behind Wartime Statistics
Federal Reserve Chair Powell: "We are prohibited from owning Bitcoin and are not seeking any changes to that law."
A Democratic congresswoman with blue and black hair is having a meltdown over "President Musk."
A sizable group of unauthorized migrants is traveling through Mexico with the aim of reaching the USA before Trump assumes office.
Beatles Reunion Electrifies London: Paul McCartney and Ringo Starr Ignite O2 Arena with Surprise Performance
Starmer's Envoy Engages Trump Team as UK Seeks Strategic U.S. Partnership
Britain's Retail Rebound Falters as Black Friday Splurge Dissipates
Bank of Japan's Bold Reckoning: A Decade of Unconventional Policy Under Scrutiny
Republican Discord Threatens Government Shutdown Amid Holiday Season
French Retiree Dominique Pellico Convicted for Recruiting 72 Men to Assault Wife Over a Decade
Putin Defends War Strategy as Global Tensions Rise
Putin Claims Progress as Tensions Rise: Conflict in Ukraine Intensifies
Putin's Paradox: Claiming Strength Amidst Sanctions and Isolation
Water as a Weapon: The Contentious Struggle for Survival in Gaza
Syria's Future: A Fight for Democracy or Another Cycle of Oppression?
UK Considers Sending Troops to Ukraine: A Strategic Move or Intensifying The Proxy War?
Renewed ISIS Threat Puts Syria’s Cultural Heritage in Peril
Escalation in Moscow: High-Profile Assassination and International Tensions Intensify
North Korean Troops in Ukraine: A New Cold War Frontier?
Ukraine's Bold Move: High-Stakes Assassination of Russian General in Moscow
Dubai's Technological Leap: Brain Chips and AI Board Members by 2025
Tragedy Strikes Wisconsin School as Shooting Claims Lives of Teacher and Student
UK's Calculated Gamble: Balancing Defense Aid to Ukraine and Domestic Demands
UK Intensifies Stranglehold on Russian Oil, but Does It Dampen Putin’s Resolve?
British Voter Endorsement of Reeves's Bold Tax Strategy
Nicola Sturgeon Warns of 'Toxic' Discourse: The Perils of Polarisation in Modern Politics
Levelling Down: How the Conservatives Underspent on Regional Revitalization
Alleged Chinese Espionage: The Entangled Web Beyond Prince Andrew
Starmer Navigates Diplomatic Tightrope Amid Chinese Espionage Revelations Involving Prince Andrew
Balancing Democracy and Disorder: The Trial of a Milkshake Incident
Royal Mail Enters New Chapter Under Czech Ownership
UK Companies Slash Jobs Amid Economic Strain
Kemi Badenoch Rekindles Flat Tax Debate Amid Inheritance Tax Uproar
Rewiring Whitehall: New Cabinet Secretary's Mandate for Change
Legal Battle Revives: Lucy Letby Seeks Fresh Appeal as Expert Evidence Faces Scrutiny
Accusations Fly as UK-China Relations Spark Tension Within British Politics
The Delicate Dance of Devolution: As English Council Elections Face Delays
The Alleged Chinese Spy at the Heart of British Royal Circles: Yang Tengbo Unmasked
Prince Andrew Withdraws from Royal Christmas Amidst Chinese Espionage Scandal
EU Takes Legal Action Against UK Over Allegedly Neglected Rights of EU Citizens
Disaster Strikes: Oil Spill in the Black Sea and Cyclone Devastation in Mayotte
Oil Tanker Disaster in the Kerch Strait: A Confluence of Environmental Catastrophe and Geopolitical Tensions
Olaf Scholz’s Gamble: The Collapse of Germany’s Coalition Government and the Path to Early Elections
Keir Starmer's 'Sycophantic' Tone: Tensions Rise Over UK-China Relations
Trump Recognizes Partial Advances in Ceasefire Attempts in Ukraine Conflict
×