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First Republic - Next?

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(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1361
Topic starter  

The chart on First Republic is astounding, to say the least:

Fact is, when you view the financials on First Republic Bank, they are a profitable company with growing revenues.  However, they also have an above average liquidity risk as well as a high Capital Risk (According to Basel III standards with CET1 ratio).  Their loans are skewed to long term and this is putting pressure on them.  First Republic has the third highest rate of uninsured deposits, loans, or bonds.  They were just behind SVB & Signature which both just went bust over the weekend.  

For now, WSJ reported that both JPMorgan & Morgan were considering cash infusions to stabilize the bank.  This, on top of the Federal Reserves measures to ensure liquidity by swapping bonds - at par rates versus market rates - for cash to shore up liquidity.  

But, a sale of FRC would come at a steep cost to current shareholders.  


   
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(@420Joe)
Estimable Member
Joined: 6 months ago
Posts: 203
 

@dhtaylor Sheeeple are paying absolute stupid amounts of dollars to bet FRC sees $16 bux by Fri 3/24/23. That FRC 11.52 low set yesterday is going to get taken out, but what Jamie Dimon loses in market capitalization of his firm he will easily get back by overcharging customers for puts (and calls!) on ticker FRC. Kinda reminds me of the AMC Apes trading actually.


   
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(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1361
Topic starter  

Dimon would not have much say in the bid/ask on puts/calls.  Those are buyers and sellers driven by the market.  There's some volatility priced in to these options.  I'm choosing not to get involved.  Two reasons: First, the company will get supported simply because we cannot have banks failing left and right.  But, at what price does this stock get supported?  There will be a price with dilution that will drop the stock valuation.  I've not read the fine print on the deals being cut just yet.

That being said, AtTheMoney calls for December are going for about $7.50 right now.  That implies that you profit with a stock price above $23.50, or thereabouts before year's end.  At the end of this year, how profitable are these banks going to be?  The Fed is going to crush the banks with raising interest rates even higher over the course of this year.  So, FRC?  Does it clear that level with certainty?  This is why there is a market and I feel a bit woozy on banks.  


   
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