In Response To Falling Share Prices, First Republic Engages Lazard To Investigate Options

American regional banks have been among those most severely impacted by the effects of Silicon Valley Bank's demise.

After First Republic's shares dropped in the wake of Silicon Valley Bank's closure, the lender contacted investment bank Lazard to assist it in examining strategic options.

According to persons familiar with the situation, Lazard has joined JPMorgan Chase in counseling First Republic on alternative options such as a potential sale, capital injection, or selling part of its assets. According to the persons, California-based First Republic has also recruited McKinsey to provide the bank with strategic planning advice.

One person with knowledge of the situation claimed that First Republic management has been opposed to the concept of a sale in the weeks since SVB's demise.

Lazard, McKinsey, and First Republic all declined to comment. The Wall Street Journal first broke the news of the hiring of Lazard and McKinsey.

When US Treasury secretary Janet Yellen hinted that a government backing for depositors at smaller banks would be available if necessary, First Republic shares rose early on Tuesday. However, in after-hours trading, the share price of the bank fell by roughly 13%.

With the collapse of SVB, the bank has been the most severely impacted among the regional banks, with its share price down more than 80% this month. The $30 billion deposit made last week by 11 of the biggest US banks with First Republic failed to significantly support the bank's share price.

Concern has been focused on the significant number of First Republic customers — roughly two-thirds by the end of 2022 — whose money with the bank surpass the $250,000 threshold on government protection for deposits, as well as the size of the bank's long-term investments and mortgages.

Due to the Federal Reserve rising interest rates last year, many of those investments and mortgages are now worth less than when First Republic purchased or generated them.

Last week, First Republic said that it was lowering its borrowings and assessing the make-up and size of its balance sheet.

According to previous Financial Times reports, First Republic has lost nearly $70 billion in deposits since the year began, when they were worth a total of $176.4 billion.