UPDATE: Jefferies Downgrades First Republic Bank; Deposit Growth Still Lagging

In a report published on Tuesday, Jefferies analyst Casey Haire downgraded First Republic Bank FRC from Buy to Hold and lowered the price target from $44 to $40.

In the report, Jefferies stated that, "Deposit formation still lagging loan production. Loan pipelines are in excellent shape and should deliver stronger originations vs. 1Q, but deposit growth remains problematic, which will force FRC to sell production due to the funding shortfall. Deposit growth is a top priority for mgmt., which has mobilized the workforce to boost deposit funding. There are a number of initiatives in place to grow deposits including raising rates, which mgmt. acknowledged they were too aggressive in cutting. Rate hikes will be methodical, and thus, it'll take a couple quarters for deposit growth to return in a meaningful way, which will keep balance sheet growth muted until 2H13."

First Republic Bank closed on Monday at $39.93