Summary
- First Republic Bank has suffered significant deposit outflows since March 9 and the health of the bank is still unclear, given the limited information shared by management.
- Doing a deeper analysis of the financials, it is clear that FRC would need to shrink its balance sheet, which would impact profitability, regulatory ratios, and tangible book value.
- Although the path to survivability is narrow and risky, in our view, very real and has the potential to reach a $30 per share tangible book value.
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Background
There is still no concrete news from First Republic Bank (NYSE:FRC) regarding its internal health since the run on the bank last month. Investors have very limited information to go by – the most relevant being the 10-K for the year-end 2022 and the 8-K released on Mar 16. Analyzing these documents, and making some reasonable assumptions, it appears that First Republic will be able to weather this storm and emerge with a tangible book value of approx. $30 per share.
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