Shares Of First Republic Are Down 40%, Sources Say; FDIC Receivership Most Likely

(CTN News) – As a result of dimming hopes for a rescue arrangement for First Republic Bank that could help the bank stay afloat, shares dropped sharply on Friday.

David Faber was told by sources that the Federal Deposit Insurance Corporation is most likely to take the troubled bank into receivership.

This is in a bid to save it from collapse. There were multiple halts in the trading of the stock due to volatility and the stock lost 43% of its value.

The shares of First Republic were down more than 50% at one point during the session, hitting an intraday low of $2.98 apiece at one point during the session.

As of now, the stock has dropped 97% this year, with most of the losses coming after investors lost confidence in the bank in the wake of the failure of two regional lenders in March.

According to sources familiar with the matter, the FDIC is actively seeking bids from other banks for First Republic if it is to be seized by the regulator.

According to those sources, there is still hope for a solution that doesn’t involve receivership, at least not immediately.

In a statement to Faber on Friday, First Republic said that the company has been engaged in discussions with a number of parties regarding its strategic options, while still serving its clients.

On Wednesday, reported that First Republic advisors were preparing to pitch larger banks on a plan that would enable the regional lender to sell bonds and other assets at an above-market rate and then raise equity.

In the short term, the sales would result in a loss for the banks that purchase the bonds, but in the long term, it would be less costly than letting the bank fail and being seized by the authorities.

It was reported Friday by Reuters that U.S. officials, including representatives from the FDIC, Treasury Department and Federal Reserve, are coordinating meetings with other banks in order to devise a rescue plan for First Republic.

The First Republic stock closed at $16 on Monday before the bank reported its first-quarter results, which showed a decline in deposits of approximately 40%.

After dropping more than 60% over the next two days, the stock reached a new all-time low.

With a focus on high net worth individuals and their businesses, First Republic offers mortgages at low interest rates to its customers.

As a result of the Fed’s hike in interest rates last year, the market value of these mortgages and other long-term assets on the bank’s balance sheet has fallen significantly, making investors fear that the bank will have to book a sizeable loss if it is forced to sell these assets in order to raise capital.

After Silicon Valley Bank and Signature Bank collapsed in March, the bank experienced massive deposit outflows. With $30 billion in time deposits, some of the nation’s largest banks, including JPMorgan Chase, have already assisted First Republic.

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