First Republic has hired investment bank Lazard to help explore strategic options after the lender’s shares fell in the wake of the shuttering of Silicon Valley Bank.
Lazard is teaming up with JPMorgan Chase to advise First Republic on potential options including a sale, capital injection or divestment of some assets, people familiar with the matter said. California-based First Republic has also hired McKinsey to advise the bank on strategic planning, the people said.
In the week after SVB’s collapse, the management of First Republic has resisted the idea of a sale, said one person familiar with the matter.
First Republican, Lazard and McKinsey declined to comment. News of the Lazard and McKinsey hires was reported earlier by the Wall Street Journal.
Republican stocks first rallied earlier on Tuesday after US Treasury secretary Janet Yellen signaled that government bailouts of small banks could be ready if needed. However, the bank’s share price fell about 13 percent in after-hours trade.
The bank’s share price has fallen more than 80 percent this month, making it the hardest-hit among regional banks following the collapse of SVB. A move last week by 11 of the biggest US banks to deposit $30bn with First Republic has failed to affect the bank’s share price.
The concern is about the high proportion of First Republic clients – about two-thirds by the end of 2022 – whose funds with the bank exceed the $250,000 cap for government insurance for deposits, as well as the amount of long-standing investments and mortgages. already on the balance sheet.
Many investments and mortgages are now worth less than when First Republic bought or originated because the Federal Reserve raised interest rates last year.
The first Republican last week said it was reducing its borrowing 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 totaled $176.4bn, the Financial Times has previously reported.