First Republic has hired investment bank Lazard to help it explore strategic options after the lender’s shares collapsed in the wake of the shuttering of Silicon Valley Bank.
Lazard joins JPMorgan Chase in advising First Republic on potential options including a possible sale, capital injection or offloading some of its assets, said people familiar with the matter. 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 management has been resistant to the idea of a sale, said one person familiar with the matter.
First Republic, Lazard and McKinsey declined to comment. The news of Lazard and McKinsey being hired was reported earlier by the Wall Street Journal.
First Republic shares had rallied earlier on Tuesday after US Treasury secretary Janet Yellen signalled that a government backstop for deposits at smaller banks could be at the ready if required. However, the bank’s share price was down about 13 per cent in after-hours trading.
The bank’s share price is down more than 80 per cent this month, making it the hardest hit among the regional banks following SVB’s collapse. A move last week by 11 of the largest US banks to deposit $30bn with First Republic has failed to meaningfully shore up the bank’s share price.
The concern has centred around the high proportion of First Republic clients — about two-thirds at the end of 2022 — whose funds with the bank exceed the $250,000 cap on government insurance for deposits, as well as the amount of long-dated investments and mortgages it has on its balance sheet.
Many of those investments and mortgages are now worth less than when First Republic purchased or originated them because of the Federal Reserve raising interest rates last year.
First Republic last week said it was reducing its borrowings and evaluating the composition and size of its balance sheet.
First Republic has lost about $70bn of deposits since the start of the year, when they totalled $176.4bn, the Financial Times has reported previously.
Source: Financial Times