FRC - Citi withdraws neutral rating on First Republic keeps under review
2023-03-22 14:14:58 ET
Citi has withdrawn its "Neutral" recommendation on struggling lender First Republic Bank, keeping the bank "Under Review" owing to the recent swing in its shares.
Given "recent volatility in the shares, the lack of information on specific deposit outflows and a wide array of potential outcomes including takeover, capital raise and/or government intervention," analyst Arren Cyganovich pulled back a Neutral rating on the stock, which has plunged around 88% over the past month amid fallout of banking sector crisis.
A string of measures have been floated in the past two days in order to stabilize the midsize lender, which includes the possibility of government backing. Last week, a consortium of 11 Wall Street banks agreed to contribute $30B of deposits in FRC in an effort to boost confidence.
Cyganovich believes that a takeout deal would be hard for the bank due to "large fair-value marks on the loan book and the securities portfolio."
As for government backing, the analyst says that some form of action looks increasingly likely, but the form that it would take stays unclear and that any move could adversely impact shareholders, the extent of which, however, remains unknown.
SA Quant system rates FRC as Sell
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Citi withdraws neutral rating on First Republic, keeps "under review"