FRC Stock Soars 29.5% on Potential Downsizing and Capital Infusion Plans

First Republic Bank (NYSE:FRC) is exploring options to sell parts of its business, including some of its loan book, as it seeks to raise cash and cut costs. The lender is considering the sale of its loans to other parties, including private equity firms, according to sources cited by Reuters. First Republic is also working with JPMorgan to find new sources of capital. Although a sale of the entire bank remains possible, First Republic is currently focused on a capital raise, according to another source. The bank is also looking at downsizing if attempts to raise new capital fail.

The move follows a consortium of major banks injecting a total of $30 billion in deposits into First Republic over the past week. The bank's share price has been under pressure due to the withdrawal of deposits by investors, which followed the failure of Silicon Valley Bank.

The bank had a disappointing start to the week after S&P downgraded its long-term issuer credit rating to 'B+' from 'BB+,’ citing "substantial long-term challenges for the business." Moody's also downgraded all long-term ratings and assessments of First Republic Bank and may cut them further as the lender faces pressures of deposit outflows and higher-cost funding as the value of its assets declines.

Despite these challenges, First Republic's stock surged by as much as 59.6% today amid a sector-wide rally, with the U.S. financial sector currently up nearly 3%. A potential conversion of some or all of the $30 billion in deposits into a capital infusion has been seen as a "vote of confidence" in the bank, according to Bloomberg Intelligence analyst Herman Chan.

Although the stock finished 29.5% higher today, it’s still down quite significantly in the past few weeks.