First Republic Bank FRC 29.47%
strengthens his ranks of advisors as the troubled lender tries to stay afloat and plan for a post-crisis future amid a transatlantic crisis of confidence in the banking system.
The Bank of California this week tapped Lazard Ltd.
LAZ 3.23%
to help assess strategic options, such as a sale, a capital injection or trimming assets, according to people familiar with the case. It also hired consulting firm McKinsey & Co. to help map out a post-crisis structure for the bank, the people said.
Lazard and McKinsey have been brought in alongside JPMorgan Chase JPM 2.68%
& Co., which had already been hired by First Republic to advise on steps the bank could take to get back on its feet after the bankruptcy of two other lenders sent its depositors fleeing.
Shares of First Republic have swung wildly in recent days as investors bet on whether it will succeed in that effort. After experiencing steep declines in recent days, shares of First Republic rose 29% on Tuesday to close at $15.77 as hopes grew that the bank will find a way to weather the storm. On Monday, the stock had fallen to an all-time low, reaching $11.52 intraday. Since March 8, the stock has lost more than 85% of its value and its market cap is just under $3 billion.
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JPMorgan and other major banks agreed last week to pour $30 billion into First Republic to try to prop up the bank. Some CEOs of those banks, led by JPMorgan’s Jamie Dimon, have continued to discuss ways to help First Republic after the move failed to sufficiently bolster confidence in the lender, The Wall Street Journal reported Monday. Options include putting those deposits to work in another form.
The talks began after 11 major banks teamed up last week to essentially return deposits that had fled First Republic, which was swept up in the contagion that followed the March 10 bankruptcy of Silicon Valley Bank and the subsequent seizure of Signature Bank. The crisis boiled over this weekend, when UBS Group AG
was forced to buy its beleaguered Swiss rival Credit Suisse Group AG
.
The addition of Lazard and McKinsey underscores the complicated situation First Republic finds itself in, one that is not easy to remedy. Finding a willing buyer for the bank, whose clients had withdrawn about $70 billion since the collapse of Silicon Valley Bank, selling stocks at these low levels, and other alternatives all face their own significant hurdles.
Adding to the pressure, S&P Global on Sunday downgraded First Republic’s credit rating deeper into junk territory, saying last week’s infusion of deposits may not be enough to address “substantial challenges in business, liquidity , financing and profitability” of the bank.
In a sign of the challenges it faces, First Republic suspended its dividend just as the $30 billion bailout was unveiled.
David Benoit contributed to this article
Write to Lauren Thomas at lauren.thomas@wsj.com and Laura Cooper at laura.cooper@wsj.com
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Appeared in the March 22, 2023 print edition as ‘First Republic Adds To Adviser Ranks’.
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