Shares of First Republic fell sharply on Friday as the bank faces the possibility of being taken into receivership by the Federal Deposit Insurance Corporation (FDIC). Sources close to the matter have indicated that this is the most likely outcome, as the bank’s shares have plummeted over 90% this year, following the failure of two regional lenders in March. Other banks have been approached for potential bids, should the FDIC seize the bank. Despite this, there is still hope for a solution that doesn’t involve receivership.
CNBC reported on Wednesday that First Republic’s advisors were preparing a plan for the bank to sell bonds and other assets at above-market rates to larger banks, which would result in a loss for those purchasing the bonds but could ultimately be cheaper than letting the bank fail.
Reuters reported on Friday that officials from the FDIC, Treasury Department and Federal Reserve are working together to broker a rescue plan for First Republic with other banks.
First Republic is a regional bank that caters to high-net-worth individuals and their businesses, offering mortgages at low interest rates. The bank’s assets, including mortgages and long-term assets, have fallen in market value since the Federal Reserve began hiking rates last year, causing concern for investors. The bank’s deposits have also decreased by 40% in Q1 2023.
