First Republic earns modest profits after steep selloff

April 27 (Reuters) – Shares of First Republic Bank ( FRC.N ) recovered on Thursday from a steep sell-off that wiped off nearly 60% of the regional bank’s market value this week.

San Francisco-based First Republic reported on Monday that it lost more than $100 billion in deposits in the first quarter, prompting a sharp selloff to new lows on Wednesday.

The stock rose 8.8% to $6.19 on Thursday as the broader S&P 500 (.SPX) rallied 2%. The S&P 500 Banks Index (.SPXBK) and the KBW Regional Bank Index (.KRX) rose 1.4% and 2.1%, respectively. First Republic shares closed last Friday at $14.26.

The First Republic’s sell-off pressure was renewed on US banks, which have been in the worst turmoil since 2008. Two other mid-sized US lenders, Silicon Valley Bank and Signature Bank, were the first casualties of the latest crisis. Losses mounting from their bond holdings after the Federal Reserve’s aggressive interest rate hikes.

Credit Suisse ( CSGN.S ), the 167-year-old Swiss bank, collapsed last month as investors lost confidence in its stocks and bonds, forcing regulators to merge with rival UBS Group ( UBSG.S ).

“First Republic lost and continues to lose deposits. No bank on earth can survive if its customers pull their money out of the bank — especially if it happens all at once,” said Adam Sarhan, CEO of 50 Park Investments.

US banking regulators are weighing the possibility of downgrading First Republic’s private ratings, Bloomberg News reported Wednesday.

Such a downgrade could limit the First Republic’s ability to borrow from the central bank, the report said.

Niketh Nishant reports in Bangalore; Editing by Saumyadeb Chakraborty

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