First Republic shares fall as Yellen says not considering 'blanket insurance' on bank deposits
Recasts lead; adds Yellen quote; updates Dimon meeting with Brainard; adds context on congressional approval
By Tatiana Bautzer and Chris Prentice
NEW YORK, March 22 (Reuters) -A "bull case" scenario for the shares of beleagueredFirst Republic Bank FRC.N as it considersits 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 tolda 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 remarksaffected 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 aplanned trip to Washington, according to a person familiar with the situation. The meeting agenda was unclear. It cameas 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 UBSGroup 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 fromFirst 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."
WRAPUP 4-Fed delivers small rate hike, sees possibility of 'some additional' tighteningnL1N35T1L5
WRAPUP 7-U.S. Fed delivers small rate hike amid global banking turmoil nL1N35U02T
UPDATE 1-US not considering 'blanket insurance' for bank deposits, Yellen saysnL1N35U2FX
Reporting by Tatiana Bautzer and Chris Prentice in New York
Additional reporting by Sinead Carew in New York
Editing by Lananh Nguyen, Nick Zieminski, Matthew Lewis and Leslie Adler
Activos relacionados
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
