FRC - First Republic Bank weighs plan to sell up to $100B of securities mortgages

2023-04-25 13:20:59 ET

First Republic Bank ( NYSE: FRC ) is reportedly considering divesting $50B-$100B of long-dated securities and mortgages as part of a larger restructuring plan.

The bank has been struggling with deposit outflows as the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital put pressure on banks operating in similar markets. First Republic's ( FRC ) Q1 earnings, announced on Monday, showed that it lost more than $70B in deposits during the quarter, even with 11 of the U.S.'s largest banks depositing $30B.

Chief Financial Officer Neal Holland said the company is working to restructure its balance sheet, reduce its expenses, and short-term borrowings. Part of its cost-cutting plan includes reducing its workforce by 20%-25% in Q2 and condensing corporate office space.

On Tuesday, Bloomberg reported the potential plan to sell up to $100B of long-dated securities and mortgages, citing people with knowledge of the matter. Any sales would help address the bank's asset-liability mismatch, they said.

First Republic ( FRC ) may offer warrants or preferred equity as an incentive to buy assets above their market value, one of the people told Bloomberg.

The bank is striving to strengthen its balance sheet to avert a takeover by regulators and to allow for a possible capital raise, the person said. FRC may also need the government to help with negotiations with some of the U.S.'s largest banks, the person added.

First Republic ( FRC ) shares plunged 44% in Tuesday afternoon trading after investors got a better sense of the company's situation.

More on First Republic Bank:

We Have Reached a Point of No Return

White House, Fed & Treasury considering plans to save First Republic

Decent Q1 Earnings But Rising Funding Costs Pose Headwind

Stock tanks after Q1 deposit outflows, plans to cut headcount

For further details see: