First Republic shares crater 50% as banks discuss fresh capital raise after $30 billion rescue
- First Republic Bank stock plunged as much as 50% Monday.
- The WSJ reported that big banks were in talks to provide more aid to the struggling lender.
First Republic Bank shares tanked as much as 50% on Monday following a report from the Wall Street Journal that big banks were gearing up to provide even more aid to the bank, a week after 11 firms banded together to pour $30 billion into the struggling lender.
Shares of the San Francisco-based bank were already down 25% earlier in the day on a fresh credit rating downgrade from S&P Global and fears of wider banking sector contagion amid UBS's emergency takeover of Credit Suisse.
The stock traded as low as $11.52 before paring some losses. Shares were down 33%, trading at $15.39, as of 12:45 p.m. ET. The stock has lost more than 80% of its value this month.
According to the WSJ report, JPMorgan CEO Jamie Dimon is leading the new effort to stabilize the bank, and the plan could involved converting last week's $30 billion deposit into a fresh capital infusion.
Elsewhere amid the banking turmoil, UBS on Sunday closed a deal with its rival Credit Suisse to prevent the latter's collapse. The deal values the embattled Swiss banking giant at around $3.25 billion.
"Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome," Axel P. Lehmann, chairman of Credit Suisse, said in a statement. "This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome."
Adding to First Republic's woes was another cut to its credit ratings by S&P Global Ratings. This moves the lender's debt deeper into junk status, citing concerns that a recently unveiled $30 billion rescue plan may not save the embattled bank.
While the deposit injection by 11 banks, including Wall Street giants like JPMorgan, Bank of America and Morgan Stanley, may ease short-term liquidity pressures, it "may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing," S&P said.
That's the second time in four days that S&P downgraded First Republic. All of the agency's ratings on the bank have "negative implications," it said, warning more downgrades are possible.
First Republic is also looking to raise money from other banks or private equity firms by selling new shares despite a $30 billion rescue plan, the New York Times reported, in a sign of the bank's liquidity issues that could be adding further pressure on its stock.
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