First Republic Bank (FRC:NYE) is currently struggling to rid its balance sheet of impending unrealized losses. FRC has been unsuccessful in its multiple attempts to raise additional capital or seek a takeover due to the fears of other banks regarding the possible unrealized losses from the bank’s poor assets. As a result, First Republic Bank stock plunged 9% on March 21 during extended trading.
FRC seeks to eliminate problematic loans and investments from its accounts, raise extra funds, and reduce expenses in order to address the situation. This, however, will result in substantial losses and severely erode the balance sheet. After removing liabilities from assets, some experts believe that FRC has a negative book value, with losses ranging from $9.4 billion to $13.5 billion.
Sources indicate that bank executives, notably JPMorgan & Chase’s (JPM:NYE) Jamie Dimon, are contemplating government action as no other bank is prepared to acquire FRC. The government could potentially take the bad assets off FRC’s books and then consider a sale or capital infusion from other banks. In addition to JPMorgan, FRC has enlisted the assistance of Lazard and the consulting company McKinsey in making restructuring decisions.
Due to the unclear future of FRC , it may not be prudent to purchase First Republic Bank stock at this time. FRC stock will likely remain volatile until a viable solution to salvage the bank is discovered. Already in 2023, FRC stock has lost 87% of its value.
The current consensus rating for FRC on Stock Target Advisor is Hold. The average price target for First Republic Bank stock is $33.50, indicating a possible upside of 728% from current levels; however, this estimate should be interpreted with caution considering the current state of the business.
