The dive never ends. US regional bank First Republic continued to slump Friday (April 28) on Wall Street after a short respite. Rumors about a strategy or a rescue plan are multiplying without materializing for the moment.
Latest: according to the Wall Street Journal, the American agency responsible for guaranteeing bank deposits, the FDIC, could take control of the bank this weekend and then sell its assets to another establishment. JPMorgan Chase and PNC Financial Services are among the companies interested, adds the business daily, citing sources familiar with the matter.
First Republic shares ended down 43% on the New York Stock Exchange on Friday, at $3.51, after being suspended several times during the session for excessive volatility. This values it at 654 million dollars, while it was worth more than 20 billion at the start of the year and more than 40 billion at its peak in November 2021.
Founded in 1985, First Republic was the 14th largest bank in the country by asset size at the end of 2022. Based in San Francisco, it has a network of agencies mainly located in California and in urban areas on the east coast, which serve a wealthy clientele.
After the failures of Silicon Valley Bank and Signature Bank
Its fate has been pending since the close failures of three American banks with similar profiles in early March, that is to say concentrated on a particular clientele and/or geographical area. The authorities and other financial institutions soon came to its rescue to prevent it from experiencing the same fate as Silicon Valley Bank and Signature Bank, namely bankruptcy after sudden massive withdrawals from their customers.
First Republic confirmed late Monday that many of its customers withdrew deposits, totaling more than $100 billion in the first quarter. She was able to count on the 30 billion contributed by the other banks in her accounts, but this is insufficient in the eyes of investors, who plunged the action on Tuesday and Wednesday before giving her a break on Thursday. The management presented some measures on Monday evening to strengthen the financial health of the bank. She also pointed out that she was exploring “strategic options” but didn’t give many details.
Intervention of the authorities? Selling the bank as a whole or just some assets? Business as usual on an upcoming interest rate cut? Rumors abound since about possible solutions but without any official announcement. The scenario of a takeover of the establishment by the authorities before the resale of the assets at a reduced price is one of the most likely. The authorities, however, may be reluctant to save a third bank in a short time.
