First Republic shares are off 40% on news feds may step in


Shares of First Republic Bank plunged by nearly 50% Friday, ratcheting pressure on the troubled bank and adding to its mounting market-confidence woes.

As of noon ET, the stock was trading at $3.72, down 40% from Thursday’s close of $6.19, after having dropped as low a $3 at one point Friday. Before the Silicon Valley Bank collapse in early March, First Republic Bank’s shares were trading at $115, so the current price represents a massive drop. It is also trading significantly lower than its 52-week high of $171.09.

After the failure of tech-friendly Silicon Valley Bank, an open question was whether other banks with related clientele would suffer a similar fate. While SVB was busy imploding, concern rose that First Republic Bank might see a similar flight of deposits, leading to its own failure.

Those worries accelerated this week after the bank reported its first-quarter earnings, revealing the extent to which its deposit base had contracted.

In its earnings report, First Republic shared that it closed last year (a pre-crisis figure) with $176.4 billion worth of deposits. That figure fell to just $104.5 million by the end of the first quarter. Included in that figure, however, was $30 billion worth of deposits from other banks, blunting somewhat the flight of customer capital from the financial institution.

Since that report earlier in the week, several things have happened.

Reuters reported Friday that officials from the American government were working with industry participants in hopes of “putting together a lifeline for the troubled lender.” Later, CNBC reported that optimism for an industry-led lifeline was fading, and that it was more likely that the “Federal Deposit Insurance Corporation to take it into receivership.”

That’s not so good for the bank, or its customers. While during SVB’s time in the barrel the U.S. government ensured that all of its deposits would be secure and accessible, there is no clear indication yet that that is new de facto policy, or that First Republic customers will enjoy similar protections.

If you’re asking yourself why any customer of the bank would therefore choose to keep money at First Republic given the struggling lifeline talks, possible government intervention, and murky protections for account balances over the quarter million dollar mark, the answer is that they probably won’t. In turn, accelerating deposit flight will only worsen the situation, as we saw with SVB.

Not to be a banking doomer, but this goose appears pretty darn cooked.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *


Elon goes to China, Rivian is selling stock for $3 billion, and Fiat’s cutest tiny EV

Welcome back to The Station, your central hub for all past, present and future means of moving people and packages from Point A to Point B. Rebecca Bellan here, and yup, I’m still steering the ship. The biggest news this week has been Elon Musk’s visit to China, a move that has the potential to […]

Read More

For startups, growth still trumps cloud cost control

ADVERTISEMENT There’s room for startups to cut their cloud costs, even if they have to balance the implicit costs of doing so, such as the time required and the potential for slower development. The question then becomes: How much of a priority is finding incremental savings for young tech companies? A recent survey of founders […]

Read More

YouTube rolls back its rules against election misinformation

YouTube was the slowest major platform to disallow misinformation during the 2020 U.S. election and almost three years later, the company will toss that policy out altogether. The company announced Friday that it would reverse its rules around election denialism, allowing some previously prohibited false claims, effective immediately. Axios first reported the changes. “In the […]

Read More
ankara escort çankaya escort çankaya escort escort bayan çankaya istanbul rus escort eryaman escort ankara escort kızılay escort istanbul escort ankara escort ankara escort escort ankara istanbul rus Escort atasehir Escort beylikduzu Escort Ankara Escort malatya Escort kuşadası Escort gaziantep Escort izmir Escort