As beleaguered First Republic Bank considers its options, analysts at Morgan Stanley say there is a 'bull case' for the stock if regulators insure customer deposits until the banking crisis ends.
Morgan Stanley analyst Manan Gosalia set a target price of $54 for First Republic shares, which were down 4.4% at $15.08 on Wednesday afternoon in New York. The optimistic case is based on a scenario in which the Federal Deposit Insurance Corporation insures all consumer deposits, according to a report published on Monday.
Banks involved in First Republic's rescue negotiations are asking for a loss-sharing arrangement with the U.S. government similar to the terms agreed by UBS GroupThe acquirer would receive support if after buying First Republic it finds a larger loss than expected, added the source, who requested anonymity to disclose private conversations.
Even if it clinches a cash infusion, the lender will probably need to take losses on securities in its so-called held to maturity portfolio, the Morgan Stanley analysts wrote.
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