First Republic (NYSE:FRC) led a comeback rally in regional bank shares Tuesday, as investors hoped for some sort of strategic action by the troubled bank — or another big regulatory move — to stem the downward spiral in the sector.
Media reports circulated Monday that JPMorgan Chase (NYSE:JPM) is giving advice on alternatives to the San Francisco bank that’s drawn the attention of Wall Street for its large amount of uninsured deposits, similar to failed Silicon Valley Bank. Those alternatives include a capital raise or possibly even a sale.
First Republic shares soared 22% in Tuesday premarket trading, following a 90% plunge so far in March. They began Tuesday ahead $3.31, or 27.2%, to $15.49.
Also helping sentiment was a report by Bloomberg News that the Treasury Department is studying whether regulators have the authority to temporarily insure deposits above the current Federal Deposit Insurance Co. cap without approval of Congress, citing people with knowledge of the talks. Though, the report said these government officials don’t believe such drastic action is necessary yet.
JPMorgan led a group of 11 banks last week that deposited a combined $30 billion into First Republic, but its stock has continued to decline. Part of the rescue plan for First Republic could entail converting some of that deposit money into a capital infusion, the Wall Street Journal reported.
