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First Republic Bank stock surged 30% Tuesday.
Photograph by Michael Short/Bloomberg
First Republic Bank
and other regional bank stocks cautiously edged higher early Wednesday ahead of the Federal Reserve’s interest-rate decision.
Shares in the San Francisco-based bank plunged in after-hours trading but were around 3% higher ahead of the open, in a sign that the volatility may not be over yet.
The bank has hired advisors
Lazard
(ticker: LAZ) and McKinsey & Co. as it explores options including a sale or asset trimming, The Wall Street Journal reported. Wall Street CEOs and U.S. officials are exploring the possibility of government backing to secure a deal to shore up First Republic, Bloomberg reported late Tuesday.
First Republic stock (FRC) fought back Tuesday, surging around 30% after a report that
JPMorgan Chase
(JPM) CEO Jamie Dimon is leading rescue talks, according to The Wall Street Journal. However, the shares remain close to 90% down since the beginning of March.
Comments by Treasury Secretary Janet Yellen also appeared to help ease fears, as she said “the situation is stabilizing,” at a banking conference. She also said the government could step in to protect depositors of other banks—as it did with Silicon Valley Bank and Signature Bank—if regulators see a risk of a run on the banking system.
Other regional bank stocks got a much-needed boost Tuesday after a prolonged period of pressure.
PacWest Bancorp
(PACW) stock rose 19%,
Western Alliance
climbed 15% and
KeyCorp
(KEY) closed 9% higher. The U.S. KBW Bank Index rose 5%–its best daily performance this year.
As bank stocks continue to recover, all eyes will be on the Fed later as it makes its March decision on interest rates. Expectations have fluctuated considerably over the past ten days or so but traders are now forecasting a 25 basis-point hike, according to the CME FedWatch tool.
“There’ll be plenty of focus on whether the Fed [will] hike today, but just as important will be how they’re looking at the current turmoil and whether they still expect any more rate hikes after today,” Deutsche Bank analysts said early Wednesday.
Write to Callum Keown at callum.keown@barrons.com
