First Republic falls 47% to record low due to rating downgrade, bank talks

(Bloomberg) — First Republic Bank shares fell 47% to a historic low after S&P Global downgraded its credit rating for the second time in a week and major bank executives discussed new measures to stabilize the lender.

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According to people familiar with the matter, the chief executive officer of JPMorgan Chase & Co. Jamie Dimon led a plan for the banks to convert some or all of the $30 billion they invested last week in First Republic into a capital injection.

However, the purported rescue appeared to do little to reassure investors as its share price continued to fall on Monday and ended at $12.18. Option traders bought more than 68,000 $5 put options expiring on Friday, which would have profited from a deeper decline this week. The stock has already lost 90% this year.

Read more: Options traders pile up First Republic puts as rout continues

First Republic bonds also fell along with stocks. The bank’s 4.375% bonds maturing in 2046 fell 3.5 cents on the dollar to 58.5 cents on Monday afternoon in New York.

S&P said earlier that a $30 billion First Republic deposit from some of Wall Street’s biggest lenders may not solve the “substantial” problems the bank now likely faces, even if it eases short-term liquidity pressures.

The First Republic thwarted a broader rally in regional banks driven by the New York Community Bancorp’s record growth. by 32%. NYCB rose after at least two analysts upgraded its rating after it agreed to accept Signature Bank deposits and some of its loans.

Read more: Record jump in New York community leads to growth of regional banks

–With assistance from Claire Boston.

(Adds bond prices in the fourth paragraph.)

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