The bank’s executives did little to establish confidence during its conference call, offering just 12 minutes of prepared remarks. The bank also said on Monday that it would cut as much as a quarter of its work force, and slash executive compensation by an unspecified sum.
“This is a trust issue, as it is for any bank, and when trust is lost, money will flee,” Aswath Damodaran, a finance professor at New York University, wrote in an email.
An analyst at Wolfe Research, Bill Carcache, laid out what he called “the long list of questions we weren’t allowed to ask” in a research note on Tuesday. Among them: How can the bank survive without raising new money, and how can it continue to provide attentive customer service — a staple of its reputation among wealthy clients — while cutting the very staff who provide it?
The bank’s options to save itself absent a government seizure or intervention are limited and challenging. No buyer has emerged for the bank in its entirety. Any bank or investor group interested in taking over the bank would have to take on First Republic’s loan portfolio, which could saddle the buyer with billions of dollars in losses based on the recent interest rate moves. The bank is also difficult to sell off in pieces because its customers use many different services like checking accounts, mortgages and wealth management.
There are no easy solutions for First Republic’s situation, said Kathryn Judge, a financial regulation expert at Columbia Law School. “If there were attractive options, they would have pursued them already,” Ms. Judge explained.