Fears about the future of the U.S. crisis bank First Republic continue. Shares plunged as much as 51.5 percent on Friday, hitting a record low of $2.99. In the meantime, trading in the securities has been halted several times.
According to a report by CNBC, the U.S. government is working hard to prevent the bank from collapsing. However, it is very likely to result in a receivership by the state deposit insurance fund FDIC, it said. The bank could not be reached for comment.
If this actually happens, First Republic would be the third U.S. bank since March that does not manage to survive on its own. In March, Silicon Valley Bank and Signature Bank went down in quick succession after customers withdrew their money. In a concerted effort, major banks had initially poured $30 billion into the likewise struggling First Republic Bank to save it.
Now the negotiations on further lifelines are proving difficult. Many of the proposed options – including the sale of assets or the creation of a "bad bank" – have so far failed to lead to a deal. The government's involvement in the talks has at least helped bring more parties, including banks and private equity firms, to the negotiating table, Reuters had learned from people familiar with the situation.
But the situation is becoming more and more dramatic. Shares of the San Francisco-based lender have been in a nosedive since the bank published its quarterly report earlier this week, revealing a deposit outflow of more than $100 billion in the first quarter. The papers lost around 75 percent of their value this week alone. Since the beginning of the year, the minus has added up to 95 percent.
At its price low, the bank had a market cap of just under $557 million, a far cry from its peak valuation of more than $40 billion in November 2021. Short sellers betting on falling prices have increased their bets against the bank by $30 million to $63 million in the last 376 days, said Ihor Dusaniwsky of Predictive Analytics.