With First Republic Bank (FRC) announcing earnings yesterday it took a little time for investors to digest it all and an hour ago FRC common shares took a huge tumble from $11.40 to $8.50. Obviously investors believe there are dire circumstances.
Needless to say the preferred shares which were already battered are now off $1-$2 per share to be trading in the $4.xx area. I certainly have no interest in any of these shares.
All banking preferreds are being dragged lower–a sea of red. It is a good time to stand aside – although as I mentioned this morning I so badly want more banking shares–but adding at this time may be way premature.
It is funny that some of the ‘smart people’ on CNBC said this morning ‘the banking crisis appears to be in the rear view mirror’. NOT!!
NEW YORK, April 28 (Reuters) – U.S. officials are coordinating urgent talks to rescue First Republic Bank (FRC.N) as private-sector efforts led by the bank’s advisers have yet to reach a deal, according to three sources familiar with the situation.
With all this going on with FRB are the preferred shareholders down the tubes or there is some chance of getting some money?
It looks like the fed might wipe out investors and sell bank for $1.00
Wells was trading down and I wondered if they would be the ” buyer’?
Charles Gasparino
@CGasparino
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Bankers working w @firstrepublic bank say they expect eventual govt receivership for the ailing bank after it exhausts private sector solutions such as asset sales and finding a buyer, both of which appear difficult. Officials at the big banks believed the Feds were poised last week to take over FRC just before its earnings announcement crushed shares.
It will be very interesting to see the Fed action next week on the Fed Funds rate. The Fed and Yellen are really between a rock and a hard place regarding inflation and recession. I think the political risk of creating a deep recession will cause the Fed to err on the side of risking more inflation. Hoping that the resultant inflation will be somewhat acceptable/workable because the huge Federal debt needs to be serviced. If we get a bad recession during an election year, statistics say that the in-power party will be defeated. Powell will be hard pressed by the Dems to prevent a bad recession. GOP, if truth be known, might not mind one.
I am thinking that the recession will be here sooner rather than later after the US defaults for 30-60 days until the House gets their act together. The US will probably be recovered by election time in 2024.
Tim,
I think it’s going to accelerate from here on with the economy slowing down.
Slow pay and collections are going up. Credit is being looked at closer. Not just on the part of companies but I suspect the banks are telling companies that lines of credit are being reduced and some maybe even withdrawing credit.
Like insurance companies getting hit with large losses then raising rates or pulling out of certain insurance or markets. Banks will do the same and have the same affect.
Just speaking from recent experience.
Charles, One mans sell point is another mans opportunity as we well know. But basically for me it started when the plus 6% 10 yearish duration ute debt came available and then crescendoed with the plus 5% five year noncallable CDs, but I dont have a lot invested in preferred land. Maybe 10% -15% worth after backing out the tradeable $25 debt issues.
Still havent figured out if its because I am worried about economy playing potential havoc on preferreds, or just pleased to sit on my nice gains this year. Self psychological evaluation is not a strong point for me, so I really dont know which it is.
Charles, I appreciate the comments. Any insight into the home market. Here in the Northeast, specifically MA/CT home prices are parabolic. Any quality home is selling 5-15% above asking price. It is nuts.
No inventory because like Charlton Heston, the only reason people are selling is that their 2.75% mortgage is being pried from their cold, dead, hands…
Amen!
sjc my job now is more servicing the distributors to the trades. I used to work for a distributor but that was 13yrs ago. I moved up the food chain to working for a manufacturer.
I don’t get out like I used to, but it seems home builders are retiring and not as many qualified workers are available or going into the trades.
I don’t think individual track housing is getting built as much as multi story condo and apt. buildings are so the sale prices are getting bid up on single homes.
My observation is too many builders moved over to multi. family and its getting over built and that is what is going to get hit next.
Ask any real estate sales people out there how well condo sales and apt. rents are doing and if they are up or down on sales and rents.
My daughter lives in a 40 yr old complex that hasn’t raised rents in 3yrs due to the Covid rent freeze and they are trying to now. She is looking around and starting to find better deals.
Much appreciated – good insight
Tim’s comments addressed why WAFDP, which had been relatively strong lately, dropped so badly today. Down 6.7% as I type.
My GTC order filled so am now about 2.5% underwater, but hopefully this will recover as the fear & panic dissipates – hopefully!!
the only thing i did was move some of my cubi preferred position over to the dept issue cubb.
i assume they would keep paying the bond even if they stopped paying the preferred position