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First Republic Bank’s stock ended the regular trading day with a 30% gain on Tuesday, amid reports that JPMorgan Chase & Co. was working to help bolster the bank’s capital, and as U.S. Treasury Secretary Janet Yellen pledged to help banks.
Yellen delivered a speech to the American Bankers Association saying that the government has a “resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe.”
Investors are also mulling reports that the U.S. Treasury Department is considering unlimited deposit guarantees if the current crisis hitting the banking sector continues.
During the session, First Republic was up as much as 43.7% on heavy volume. The gains grew more modest as the day progressed, but the stock held onto a 29.5% rise to close at $15.77 for its largest one-day rally ever.
The move comes a day after a sharp drop in First Republic to an all-time low of $12.18 as investors questioned its balance sheet and financial health following two credit-rating downgrades.
The slide came despite reports in the Wall Street Journal and other news outlets that JPMorgan CEO Jamie Dimon was working to raise more support for the bank. That’s after he helped orchestrate a $30 billion deposit from 11 major banks last week.
After Monday’s close, CNBC reported JPMorgan was advising First Republic on strategic alternatives that included a capital raise or sale.
Janney Montgomery Scott analyst Tim Coffey said First Republic’s stock has fallen so sharply in recent days partly because investors don’t know what a potential second capital raise might look like or how the bank’s balance sheet is faring after a steep run in deposits. Another unknown is the company’s Tier 1 leverage ratio, which is the amount of capital it keeps on hand for riskier investments.
“We don’t know where they are now,” Coffey said. “We don’t know what current deposit balances are or where they’re at with their Tier 1 ratio, or where their balance sheet is. That’s why there’s so much concern.”
Tomi Kilgore contributed to this report.
