WHEN: Today, Monday, March 20, 2023
WHERE: CNBC’s “The Exchange”
Following is the unofficial transcript of breaking news from CNBC’s David Faber on “The Exchange” (M-F, 1PM-2PM ET) today, Monday, March 20th. Following is a link to the video on CNBC.com:
All references must be sourced to CNBC.
DAVID FABER: Hey Kelly, yeah, I certainly wanted to just build on the reporting we’ve done and then others have done as well that you guys have been following. This has been the key bank in many ways, at least up late in the marketplace, First Republic because so many other regionals seem to at least in terms of their stock prices be recovering a bit and sort of does seem to be a bit more confidence in the market. But as I’ve been reporting, this is still seen as the stumbling block just sort of hoping that we’re towards the end of this, let’s call it mini crisis in the banking industry. What I can tell you at this point and building on what the Wall Street Journal reported about an hour or so ago, is that JPMorgan has been hired or at least acting as advisor to First Republic from an investment banking side as well. Now there are reports of course of Jamie Dimon being involved in trying to coordinate a capital raise unclear to me if he’s leading that charge. Certainly he is one of a number of different banks that or one of a number of different leaders of banks that gave the company deposits last Thursday. And there is a belief that in order for it to really potentially outrun any current issues and be able to actually get back to the business of being a bank, it needs to raise capital. That would be dilutive. That is why you see the stock getting hit to the tune of as much as 30%. Again, as with so many things during this period, it’s uncertain as to what will happen here. And as I reported this morning, there is also advice being given in terms of the possibility of a sale, would there be a buyer for the bank? Would that buyer require government assistance in some way? Can the government come in if in fact the bank is actually not failing? These are all kind of key questions. But right now, one of the efforts does seem to be focused on a capital raise, Kelly. Now, you know, last Sunday, there was a hope that the liquidity facilities provided by the federal government would be enough to instill confidence. It wasn’t. On Thursday, you had the 30 billion in additional deposits, i.e. liquidity being contributed by 11 banks. There was a hope that would instill confidence. It wasn’t quite enough. And so here we are now talking about a potential capital raise for First Republic to allow it the hope would be at least to start to make new loans, give confidence to its investors to its employees to its customers and anybody else. We’ll see—
KELLY EVANS: Quick—
FABER: It remains a key question mark, I guess, in terms of the return to health, so to speak, of the overall sector, Kelly.
EVANS: Just a simple observation, David, obviously, a capital raise is dilutive to the equity base, but you’d still expect the shares to be rallying if it felt like this move would now be enough to guarantee its survival, and instead we see the opposite happening.
FABER: It’s a good point. You’re right. I mean, nobody knows exactly how diluted it would be. Remember, we’re talking about a 3 billion or less market value at this point. So if you’re gonna put in $25, $30 billion in capital, I don’t know what the number is, but I’ve reported the whole can be as much as 25, that is going to be quite dilutive. But to your point, the market has taken it so far as another sign of trouble.
EVANS: Yeah, it’s heading back towards the lows to some extent just over $15 a share. David, thank you.
