FRC Surges as U.S. Regulators Weigh Expansion of Emergency Lending

Shares of First Republic Bank (NYSE: FRC) surged in morning trading on Monday after Bloomberg reported that U.S. regulators are mulling over expanding an emergency lending facility to extend more support to banks. This measure would grant FRC more time to strengthen its balance sheet.

Over the past month alone, FRC stock has lost more than 80% of its value as it has been battered following the collapse of SVB and Signature Bank. Last week, Reuters reported that in an attempt to clean up its balance sheet, FRC was trying to shave off some of the bad loans and investments from its books, raise more funds, and cut costs. However, this would have only weakened the bank’s balance sheet further and would have led to huge losses.

Earlier this month, a consortium of 11 banks had agreed to uninsured deposits of around $30 billion at the bank.

Meanwhile, as this emergency borrowing continues, Moody’s has warned of spillover risk. The firm stated in its report on global credit conditions, “Looking ahead, the longer that financial conditions remain tight, the greater the risk that stresses spread beyond the banking sector, unleashing greater financial and economic damage than we anticipated.”

Moody’s also warned that as “calibrating policy remains challenging” it raises the “risks that policy missteps, limitations or unintended consequences could result in a further deterioration of the credit environment.”

Emergency borrowing under the Fed’s two backstop facilities including Discount Window Lending and Bank Term Funding Program surged to $163.9 billion last week while weekly borrowing under the Discount Window Lending program is typically below $10 billion. This underlines the extent of the current banking crisis.

Analysts remain cautiously optimistic about FRC stock with a Moderate Buy consensus rating based on seven Buys, ten Holds and one Sell.