New York (EFE)
According to CNBC, the San Francisco-based bank will ask big US banks to buy First Republic bonds at above-market rates even though this could mean “a total loss of a few billion dollars.”
First Republic argues that it is preferable for the sector to assume these losses than the consequences of an eventual collapse of the bank.
For its part, Bloomberg indicates that First Republic Bank is exploring the sale of between 50,000 million dollars and 100,000 million dollars of assets.
Mortgages and long-term securities
The sales, which include mortgages and long-term securities, are aimed at reducing the mismatch between the bank’s assets and liabilities, according to Bloomberg.
Potential buyers, including large US banks, could receive warrants or preferred stock as an incentive to buy assets above their market value.
First Republic Bank shares continued to plunge 27.90% today, after they fell nearly 50% on Wall Street on Tuesday after releasing their accounts, which showed the huge loss of deposits it suffered and its difficult financial situation.
The entity, which in March had to be rescued by other banks with a joint injection of 30,000 million dollars (27,160 million euros at current exchange rates), presented its quarterly results at the close of the stock market on Monday and immediately began to plummet.
Panic unleashed after the collapse of Silicon Valley
At the beginning of March, before the First Republic was infected by the panic unleashed after the collapse of Silicon Valley Bank (SVB), those same shares were trading above $120.
The bank, which traditionally serves mostly wealthy clients, lost nearly $100 billion in deposits during the March banking crisis.
Counting the 30,000 million contributed by other banks to stabilize the situation, the First Republic had at the end of the first quarter 104,500 million dollars in deposits, 40% less than before.
The First Republic also suffered a sharp drop in its turnover and profits and, although the bank assures that the situation is stabilized, the outlook for the future is complex due to the large loans it had to request to face the exit of deposits.
Given that many of the loans it had previously given to clients have long terms and low interest rates, analysts warn of the difficult situation facing the entity.
To try to save its business, First Republic announced a savings plan on Monday that will include a 20-25% cut in its workforce, cuts in executive compensation, less office space and a reduction in non-profit projects. essential.
The entry First Republic Bank studies the sale of new shares to other banks was first published in EFE Noticias.