First Republic Bank is considering selling between $50B and $100B in assets.
The
beleaguered lender is working to shore up its finances following a run
on deposits in March, reports Bloomberg, citing people familiar with the
matter.
- First Republic may sell long-dated mortgages and securities in a bid to stabilize its balance sheet.
- Many of First Republic's assets are mortgages that were issued when interest rates were lower than they are now.
- The bank may need to book a loss when it sells these mortgages, unless it can entice buyers to acquire them near face value.
- To that end, the bank may offer potential buyers perks such as warrants or preferred equity.
- First Republic may also be forced to cut back its wealth-management business, which was a major contributor to its prior success.
- The bank's shares dropped nearly 50% on Tuesday after it reported disappointing financial results for the first quarter.
Zoom Out:
- First Republic is trying to avoid being seized by the Federal Deposit Insurance Corp.
- The lender announced on Monday that it lost over $100B in deposits over the first three months of 2023.
- The run on deposits came amid low confidence in the banking sector following the seizure of Silicon Valley Ban and Signature Bank by federal regulators in March.
