First Republic Bank’s shares fell nearly 10% in premarket trading on Wednesday as analysts highlighted concerns about the troubled lender’s plans to turn around its business.
The company’s shares were last trading at $7.34, paring some losses from a 27% plunge earlier in the day.
The stock lost nearly half its value on Tuesday and will hit a record low for the second straight day if current levels hold.
The bank is looking at several options, such as selling assets or the creation of a “bad bank”, a source familiar with the matter told Reuters on Tuesday.
First Republic’s advisers have already lined up potential purchasers of new stock in the lender if they can fix the bank’s balance sheet, CNBC reported on Wednesday, citing sources.
However, analysts have highlighted several roadblocks which could complicate rescue efforts for the San Francisco-based lender as it looks to emerge out of the crisis sparked by an outflow of more than $100 billion in deposits in the first quarter.
First Republic Bank deposits tumble more than $100bn as it explores options
“The (First Republic) assets will be sold, but it may take some time and could be sold at a pretty severe discount to par,” David Wagner, portfolio manager at Aptus Capital Advisors, said.
At least three brokerages have cut their price targets on First Republic’s shares since it reported first-quarter earnings on Monday.
“First Republic’s problems are likely idiosyncratic … and they obviously have a painful path in front of them,” Art Hogan, chief market strategist at B Riley Wealth in Boston, said.
A string of earnings reports from regional banks last week had reassured investors, but the banking sector has come under renewed pressure following First Republic’s results.
The KBW Regional Banking index has lost 4.4% so far this week.
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