First Republic shares slide 8% even after Wall Street’s white knights promise a $30 billion rescue

• First Republic stock fell in Friday’s premarket trading despite a $30 billion Wall Street rescue package.
• The shares had rallied 10% Thursday after 11 banks led by JPMorgan stepped forward to bolster the embattled lender.
• But they reversed again after First Republic said it had borrowed billions over the past week.

Shares in embattled First Republic Bank fell 8% in premarket trading early Friday despite a $30 billion lifeline from 11 of America’s biggest banks.

The banks, led by JPMorgan, Bank of America, Citigroup, and Wells Fargo, said Thursday they would deposit a collective $30 billion into First Republic. 

The San Francisco-based lender’s stock rose to close 10% higher Thursday after the news. Fears eased that it would suffer a bank run, where customers rush to pull their deposits, given the fresh injection of cash.

But shares of First Republic swung lower in Friday premarket trading, sliding 7.7% to $31.64. Earlier, in the extended session Thursday, they dropped as much as 17%.

The slide came after the bank said it would suspend its dividend and it would concentrate on cutting down on borrowings.

First Republic also said its cash position was around $34 billion, excluding the Wall Street $30 billion. It noted it borrowed up $109 billion from the Federal Reserve between last Friday and Wednesday this week, when the banking sector and markets were rattled by the failure of Silicon Valley Bank.

The San Francisco lender faces some of the same financial problems that beset SVB.

At the end of last year, they both booked a high share of uninsured deposits — 94% for SVB, and 68% for First Republic. These are deposits unprotected by the FDIC’s insurance limit of $250,000 per account.

At the same time, they have worryingly high unrealized losses. SVB is sitting on about $16 billion and First Republic has $4.8 billion on its held-to-maturity bond book.

On Sunday, First Republic said its liquidity position remained “very strong”. In addition, it said in a regulatory filing it had received $70 billion of liquidity from the Fed and JPMorgan Chase. 

The bank’s credit had earlier been downgraded to junk by ratings agencies S&P and Fitch.

First Republic shares have dropped 58% over the past five trading sessions, and they are down about 70% year to date, as of Thursday’s close.