First Republic Bank Teaser on The Brink of Collapse

Shares fell to new all-time lows on reports First Republic Bank (FRC) is on the brink of collapse as the federal government and the country's biggest bank are reluctant to put together a rescue package.

The troubled lender reported deposit outflows of over $100 billion, or 40% of the total, in the first quarter.

That figure would have been more than 50% if not for the $30 billion injection of uninsured deposits from the nation's 11 largest banks in March.

First Republic Deposit falls off a cliff despite rescue

Quarterly Total Deposits Reported by First Republic Bank

The $104.47 billion total deposits reported by First Republic in Q1 2023 included the $30 billion rescue by big banks.

In response, FRC shares fell nearly 50% yesterday, and are down 30% today. The bank's market cap fell below $1 billion in intraday trading, a small fraction of its peak of $40 billion in November 2021. Its price-to-earnings (P/E) ratio fell to 0.7. The stock's volatility prompted the New York Stock Exchange (NYSE) to halt trading of FRC 12 times on Wednesday.

To make matters worse, First Republic faces the prospect of losing access to the Fed's lending facilities, Bloomberg reported.

US regulators prefer a private defense that would not involve federal authorities seizing the bank, which could further reduce the FDIC's insurance fund.

Management is scrambling to persuade regulators and executives at big banks to provide another financial lifeline. The officers are engaged in a last ditch effort to improve the financial condition of the bank.

Its options include transferring troubled assets to a "bad bank" or selling the assets at above-market rates. However, other banks may be reluctant to intervene for fear of losing their unsecured deposits and would prefer the FDIC to take control of part of First Republic's assets.

First Republic Bank ran into financial trouble shortly after the collapses of Silicon Valley Bank (SVB) and Signature Bank in March, as it held the third-largest share (of the two collapsed lenders) of uninsured deposits exceeding the FDIC's $250,000 limit. was behind).

FRC shares fell 60% in the first trading session following the collapse of SVB and Signature Bank. They have extended their decline since then, and are down more than 95% year-to-date.