JPM - First Republic Bank cut as RayJay warns of downside risk to EPS in event of deposit outflows

2023-03-13 08:34:30 ET

Raymond James on Monday downgraded shares of First Republic Bank ( NYSE: FRC ) to Market Perform from Strong Buy as its earnings power could be negatively impacted if net deposit outflows were to come to fruition.

The stock dropped some 65% in premarket trading as the failures of Silicon Valley Bank ( SIVB ) and Signature Bank ( SBNY ) spark contagion fears . Still, First Republic ( FRC ) said Sunday it has enhanced and diversified its financial position by gaining access to additional borrowing capacity from the Federal Reserve and JPMorgan Chase ( JPM ).

"Despite the added liquidity sources, we believe deposit balances will remain under pressure in the immediate near-term," analyst David Long wrote in a note to clients.

Over the intermediate- to long-term, though, "we believe First Republic can eventually return to driving growth and improved profitability" provided bank regulators' support of the broader industry eases the panic among depositors, he added.

"Over time, we envision the bank’s customer service-driven model driving market share gains and increase in investor interest."

The Market Perform rating falls in between the Quant system rating of Sell and the average analyst rating of Buy.

Seeking Alpha contributor The Value Investor views FRC as a Hold in the wake of an uncertain backdrop for the banking space.

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