📈First Republic Suspends Sividend Who is Next....
First Republic suspends dividends of preferred stock over the weekend. Usually three day weekends are filed with news events that companies want digested over longer period of time. This allows the company to control the narrative. The fact that FRC waited so long to release this information is troubling. Twenty percent of Financial companies issue earnings reports this week. We will get a better picture of the banking sector but FRC has not been able to find a partner or capital injection to maintain their current cash flow needs. This means that there is no plan in place to support the company in its current state.
Below is the chart of unrealized losses and percentages of deposits over 20%. We first looked at this on March 18th in the Banks need a solution post
We can clearly see that no solution has been reached. The top right of the chart is the most at risk and we can see FRC is the highest remaining regional bank in the upper right quadrant. PACW has a preferred as well PACWP but their deposits are significantly higher as a percentage under $250,000.
Financial sector continues to hold major support and the 200 weekly SMA.
Regional banks are breaking down with a new weekly closing low on the sector
Regional banks have been keeping up with larger banks and now are underperforming considerably. KRE (blue) XLF (orange)
This is the greatest outperformance of large banks to regional banks since the great financial crisis. A comparative shows XLF breaking out to all time highs over the XRE on a performance disparity basis.
For now it is wait and see until Monday as to how FRC acts. The only thing we know for certain is that banking will be volatile. For more in depth coverage watch the video below. It’s extensive about what stocks will move this week , what part of the economic cycle we are in and what stocks and sectors benefit the most. Also pay attention to the comments on the Bear Market Predictability Model by Goldman Sacs.
Wishing Everyone Massive Success in 2023 🍾