First Republic stock has plummeted after Silicon Valley Bank’s failure.
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First Republic Bank shares plunged 32% Friday after CNBC reported the lender looks headed toward a government takeover.
The lender that lost $100 billion in deposits in Q1 will likely be subjected to FDIC receivership, the report said.
First Republic was reportedly working on a fresh private-sector plan to stave off an FDIC takeover.
First Republic Bank shares sank more than 30% Friday, veering sharply lower following a CNBC report the struggling California-based lender was likely headed toward a takeover by the bank industry’s insurance regulator.
Shares quickly plunged by 32% and were halted for volatility more than an hour into Friday’s trading session. The shares recently quoted at $4.21 apiece hit fresh record lows.
CNBC said sources said the most likely route for the bank is for the Federal Deposit Insurance Corporation to take it into receivership. Such action would mark the third bank seizure by the FDIC since March when it took over the collapsed lenders Silicon Valley Bank and Signature Bank. The latter takeovers were the first since the global financial crisis.
First Republic Bank shares in premarket trade climbed as much as 13.5% after the Financial Times reported the company, centered on wealthy clients, was working on a plan to prevent being seized by the FDIC. The agency last month took over SVB and Signature Bank to prevent a broader run on deposits at regional banks sparked by SVB’s massive financial troubles.
Advisors at First Republic, which lost $100 billion in deposits in the first quarter, were working on a private-sector plan to stave off the potential of a takeover by the FDIC, the FT reported late Thursday.
Three unnamed sources told the British publication there had been a shift in tone among the bank’s advisors compared with Tuesday and Wednesday when the bank’s stock slid 65% and fears about an FDIC takeover grew.
The advisors were asking banks to purchase bonds from First Republic at above-market rates, allowing the company to shrink its losses. But sources told the FT that such a move may not be sufficient enough to stabilize First Republic on its own and that was still possible the FDIC would seize the bank.
JPMorgan was involved in the talks but other large institutions may have been party to another rescue plan for First Republic, the FT reported, adding that JPMorgan has been acting as First Republic’s banker.
The advisors have been eager to win approval from Biden administration officials for a plan that can keep the bank running.
The FT report said the White House, US Treasury and FDIC declined to comment. JPMorgan and Lazard, which is also working with First Republic, also declined FT’s comment requests.
First Republic shares had plunged 95% this year through Thursday’s session in the wake of the banking industry shakeup spurred by the collapse and seizures of Silicon Valley Bank and Signature Bank last month.
CNBC on Wednesday reported that First Republic’s advisors were pitching the bond-buying idea to larger rivals, making the case that if the bonds weren’t purchased by them, they may be on the hook for FDIC fees of about $30 billion should First Republic fail.
JPMorgan along with other banks chipped in last month for a $30 billion deposit infusion into First Republic.
First Republic shares on Wednesday logged a record-low close of $5.69.