- WSJ reported that Jaimie Dimon, CEO of JP Morgan (JPM.US) is still working on a new plan to help First Republic Bank (FRC.US);
- The more than 25% rise in First Republic's stock price is fueling gains in other banks. Before the open, the price of bank holding company US Bancorp (BAC.US) and major banks like Bank of America (BA.US) and Citigroup (C.US), among others, rallied;
- The sentiment was also improved by comments from U.S. Treasury Secretary Janet Yellen indicating that the US could secure deposits for the remaining banks if there was a risk of contagion;
- Shares of UBS (UBSG.CH), which acquired Credit Suisse, gained nearly 8% today, signaling that the market is gaining confidence that the acquisition was ultimately not toxic for the institution and significantly increased its assets under management.
First Republic Bank's shares came under pressure due to a high percentage of uninsured deposits (above $250,000), which caused an exodus of wealthier customers, and the failure of a similarly sized, regional SVB bank. Investor confidence was again undermined yesterday as ratings agency S&P Global again downgraded the lender to a very low rating.
Yellen's comments, along with JP Morgan's continued focus on the bank's bailout plan, could make the outflows finally stop and investors begin to return to the institution. Such a situation could become a catalyst for positive sentiment. First Republic's shares are currently trading with attractive fundamental ratios like a C/Z of around 1.5 and a C/Wk of 0.3, with an average dividend yield of 9%. Some commentators point out, however, that raising the government-guaranteed amount or fully guaranteeing deposits would require a special act of Congress, which is not currently under consideration.
Shares of First Republic Bank (FRC.US), US Bancorp (BAC.US, yellow) and JP Morgan (JPM.US, purple). Source: xStation5
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