Embattled banker First Republic (NYSE:FRC) is trying to clear the looming unrealized losses on its balance sheet. The bank has made numerous efforts to raise additional capital or be taken over. All efforts have been in vain so far, as other banks worry about the potential unrealized losses that could stem from the bad assets. FRC stock fell 9% in the extended trading session on March 21.
Per a Reuters report, FRC is trying to shave off some of the bad loans and investments from its books, raise more funds, and cut costs. But doing so will lead to huge losses and further weaken the balance sheet. Some analysts’ calculations reveal that FRC has a negative book value. The assets minus liabilities calculation amount to losses between $9.4 billion and $13.5 billion.
The latest efforts by JPMorgan & Chase’s (NYSE:JPM) Jamie Dimon and other big bank officials have them weighing government intervention, as no other bank is offering to take over FRC. The government could first take the bad assets off FRC’s books and then consider a sale or additional capital infusion by other banks. Further, the Wall Street Journal reported that FRC has added Lazard and consulting firm McKinsey to its advisory committee alongside JPMorgan to aid in the restructuring decisions.
Should You Buy FRC Stock?
Now may not be a good time to buy FRC stock. The stock will continue to remain volatile until a sound mechanism is sought to bail it out or save it. So far in 2023, FRC stock has lost 87% of its value.
With seven Buys, ten Holds, and one Sell rating on TipRanks, FRC has a Moderate Buy consensus rating. Also, the average First Republic Bank price target of $130.62 implies a huge 728% upside potential from current levels.
