Quote:
Originally Posted by Slava
First Republic also has a bunch of assets that don't qualify for the new program that the Fed unveiled to help these banks. I know the stock is rallying and I'm not commenting on that specifically...but it would make me leery.
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Oh that definitely was in no way a suggestion to buy First Republic stock at all. I did an analysis on it a few years ago and concluded it was hopelessly overpriced at that time, which is why I happen to know a few things about it. I'm neither long nor short and have actually never had a position either way.
I agree they aren't a huge beneficiary of the Fed program, because most of their assets are those low cost loans I mentioned, not treasuries or mortgage backed securities. I doubt the Fed is going to start taking individual mortgages as collateral, and the Jumbo loans they specialize in don't qualify for agency mortgage backed securities, which is why they're more expensive from everyone else.
As a matter of interest, they're actually short deposits to cover their loan book, so have limited treasuries. I manage some USD funds at Interactive Brokers that are automatically deposit swept into banks to benefit from deposit insurance. First Republic has been on that list recently, which is a bad sign because those deposits are expensive for banks - IB basically just takes the highest offer they can get and only goes up to FDIC limit per client.