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Shares in First Republic Bank are up 30% on Tuesday.
Photo by Michael Short/Bloomberg
Shares in First Republic Bank fell early Wednesday ahead of the Federal Reserve’s interest rate decision.
Shares of the San Francisco-based bank plunged in after-hours trading Tuesday and were down around 2% before the Wednesday open, a sign that the volatility may not be over yet.
The bank has hired advisors Lazard (Ticker: LAZ) and McKinsey & Co. to explore options such as selling or scaling down assets, the Wall Street Journal reported. 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.
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.
Shares in the First Republic (FRC) also hit back on Tuesday, rising around 30% after reports that JPMorgan Chase (JPM) CEO Jamie Dimon was holding bailout talks, according to the Journal. However, shares remain down nearly 90% since early March.
Comments by Treasury Secretary Janet Yellen also seemed to help assuage fears, telling a banking conference that “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.
Other regional bank stocks 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.
As bank stocks continue to rally, investors will be watching the Fed closely later when it makes its March interest rate decision. Expectations have fluctuated significantly over the past 10 days, but traders are now forecasting a 25 basis 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.
Write to Callum Keown at [email protected]