Analyst David Chiaverini explained his bearish view in a note today.
Shares of regional bank are already down over 80% versus their YTD high.
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Shares of First Republic Bank (NYSE: FRC) are down over 20% on Friday after a Wedbush Securities’ analyst turned super bearish on the regional players.
First Republic stock downgraded to neutral
Last night, a consortium of financial behemoths confirmed plans of injecting $30 billion into the commercial bank to deliver it from the ongoing turmoil.
Still, David Chiaverini downgraded First Republic stock today to “neutral” and said it could crash further to just $5.0 a share. His research note reads:
A distressed M&A sale could result in minimal, if any, residual value to common equity holders owing to FRC’s significant negative tangible book value after taking into account fair value marks on its loans and securities.
The bank stock has already lost more than 80% versus its year-to-date high.
S&P and Fitch recently cut FRC to junk
Anonymous sources had told Bloomberg earlier this week that the California-based bank was considering options, including a potential sale, which, as per Wedbush’s Chiaverini would be a positive for the sector at large but not so much for First Republic stock.
While it has an exceptionally strong reputation and franchise value as evidenced by its high NPS, we’re doubtful that valuation accorded to these factors would be enough to cover tangible book value shortfall on a FV basis.
Both S&P Global and Fitch recently slashed their respective ratings on First Republic Bank to junk as well. Remember that it’s the same bank that reported a 16.5% year-on-year growth in its quarterly revenue to $5.9 billion hardly two months ago.
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