First Republic shares tumbled almost 33%, hurting other regional banks

Shares of First Republic were under severe pressure Friday despite the beaten-down regional bank receiving aid from other financial institutions the day before.

At the market close, the stock was down 32.8%, the worst performer in the SPDR S&P Regional Banking ETF (KRE) — which dropped 6.0%. PacWest lost 19% and Western Alliance dropped 15%, while US Bancorp declined more than 9%.

Those losses came even after 11 other banks pledged to deposit $30 billion in First Republic as a vote of confidence in the company.

“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the group, which included Goldman Sachs, Morgan Stanley and Citigroup, said in a statement.

There were concerns that Thursday’s deposit infusion may still not be enough to shore up First Republic in the future.

Atlantic Equities downgraded First Republic to neutral, noting the bank may need an additional $5 billion in capital. 

“Management is exploring different strategic options which may include a full sale or divestments of parts of the loan portfolio. The limited information provided implies that the balance sheet has increased substantially, which may well necessitate a capital raise,” analyst John Heagerty wrote.

Meanwhile, Wedbush analysts put a $5 price target on First Republic, saying that a takeover could wipe out most of its equity value.

“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.”

Late Friday, after the stock market closed, the New York Times reported that First Republic was in talks to raise capital by selling shares to other unnamed banks or private equity firms in a private sale. Terms of the deal, as to the price of the shares, how many and to whom, were still under discussion, and it was also possible that the entire bank might be sold, the Times said.

— CNBC’s Michael Bloom and Scott Schnipper contributed to this report.