First Republic has hired investment bank Lazard to help it explore strategic options after the lender’s stock collapsed following the closure of Silicon Valley Bank.
Lazard joins JPMorgan Chase in advising First Republic on possible options including a possible sale, a capital injection or the spin-off of some of its assets, people familiar with the matter said. The California-based First Republic has also hired McKinsey to advise the bank on strategic planning, the people said.
In the weeks following SVB’s collapse, First Republic’s management has balked at the idea of selling it, a person familiar with the matter said.
First Republic, Lazard and McKinsey all declined to comment. The news that Lazard and McKinsey had been hired was previously reported by The Wall Street Journal.
Shares in the First Republic rallied earlier Tuesday after US Treasury Secretary Janet Yellen signaled a federal bailout of deposits at smaller banks could be in place if needed. However, the bank’s share price fell about 13 percent in after-hours trading.
The bank’s share price has fallen more than 80 percent this month, hitting it hardest among regional banks after the collapse of the SVB. A move last week by 11 of the largest US banks to deposit $30 billion in First Republic didn’t provide much support for the bank’s share price.
Concern has centered on the high proportion of First Republic customers — about two-thirds by the end of 2022 — whose funds at the bank exceed the $250,000 cap on state deposit insurance and the amount of long-term investments and mortgages it has on its balance sheet.
Many of those investments and mortgages are worth less now than they were when First Republic bought or issued them because the Federal Reserve has hiked interest rates over the past year.
First Republic announced last week that it was reducing its borrowing and assessing the composition and size of its balance sheet.
First Republic has lost about $70 billion in deposits since the beginning of the year when they totaled $176.4 billion, the Financial Times previously reported.