The bank has hired advisors Lazard (Ticker: LAZ) and McKinsey & Co. to explore options such as selling or scaling down assets, a person familiar with the matter told Barron’s. News of Lazard’s involvement was previously reported by The Wall Street Journal.
Wall Street CEOs and US officials are exploring the possibility of government support to secure a deal to shore up the First Republic, Bloomberg reported late Tuesday.
Shares of the San Francisco-based bank plunged in after-hours trading Tuesday, a sign that the volatility that hit the bank may not be over yet. Shares closed 30% higher on Tuesday after a report in the Journal said JPMorgan Chase (JPM) CEO Jamie Dimon was holding bailout talks. The stock remains down nearly 90% since early March.
On Wednesday, First Republic stock rose 2.5% after the market open, outperforming the S&P 500’s 0.3% gain.
Advertisement – Scroll to Continue.
Comments by Treasury Secretary Janet Yellen also appear to have helped allay fears, as she told a banking conference “the situation is stabilizing”. She also said the government could step in to protect depositors at other banks — as it has done at Silicon Valley Bank and Signature Bank — if regulators see the risk of a run on the banking system.
In Europe, UBS offered to buy back 2.75 billion euros ($2.97 billion) of bonds it issued less than a week ago amid its takeover of longtime rival Credit Suisse. The Swiss bank said in a statement it was offering to buy back the debt “as a result of a cautious assessment of these recent developments and the Issuer’s (UBS) long-term commitment to its credit investors.”
UBS stock has rallied more than 12% since the deal with Credit Suisse and is now close to where it was trading before the Silicon Valley bank collapsed earlier this month. After shares fell nearly 20% early Monday, investors may be starting to see the acquisition as a good thing for UBS. On Wednesday, UBS Group stock fell 2.3%.
Advertisement – Scroll to Continue.
As bank stocks continue to rally, investors will be watching the Fed closely later on Wednesday when it announces its next rate move after a two-day meeting of its monetary policy committee. Expectations have fluctuated significantly over the past 10 days or so, but interest rate futures now suggest traders are expecting a quarter-point rise, according to the CME FedWatch tool.
“A lot of attention will be focused on whether the Fed [will] rate hike today, but just as important will be how they view the current turmoil and whether they expect more rate hikes after today,” analysts at Deutsche Bank said early Wednesday.
Other regional bank stocks also got a much-needed boost on Tuesday after a prolonged period of pressure. PacWest Bancorp (PACW) shares rose 19%, Western Alliance rose 15% and KeyCorp (KEY) closed 9% higher. The US KBW Bank Index rose 5% – its best daily performance this year.
On Wednesday, PacWest and KeyCorp
Advertisement – Scroll to Continue.
were down 4.2% and 1.6%, respectively, in last trade. However, shares of Western Alliance rose another 9% on Wednesday morning.
Write to Callum Keown at [email protected]