The dive never ends. The American regional bank First Republic continued to collapse on Friday April 28 on Wall Street after a short respite. Rumors about a strategy or a rescue plan are multiplying without materializing for the moment.
Latest: according to wall street journal, the American agency responsible for guaranteeing bank deposits, the FDIC, could take control of the bank this weekend and then sell its assets to another establishment. JPMorgan Chase and PNC Financial Services are among the companies interested, adds the business daily, citing sources familiar with the matter.
The action of First Republic ended down 43% on the New York Stock Exchange on Friday, at 3.51 dollars (3.15 euros), after being suspended several times during the session for excessive volatility. This values it at $654 million, down from over $20 billion at the start of the year and over $40 billion at its peak in November 2021.
Founded in 1985, First Republic was, at the end of 2022, the fourteenth largest bank in the country by size of assets. Based in San Francisco, it has a network of agencies mainly located in California and in urban areas of the East Coast, which serve a wealthy clientele.
After the failures of Silicon Valley Bank and Signature Bank
Its fate has been pending since the close failures of three American banks with similar profiles at the beginning of March, that is to say concentrated on a clientele and – or – a particular geographical area. The authorities and other financial institutions soon came to its rescue to prevent it from experiencing the same fate as Silicon Valley Bank and Signature Bank, namely bankruptcy after sudden massive withdrawals from their customers.
First Republic confirmed late Monday that many of its customers withdrew deposits, more than $100 billion in total in the first quarter. She was able to count on the 30 billion contributed by the other banks in her accounts, but this is insufficient in the eyes of investors, who plunged the action on Tuesday and Wednesday before giving her a break on Thursday. The management presented some measures on Monday evening to strengthen the financial health of the bank. She also pointed out that she was studying “strategic options” but without giving many details.
Intervention of the authorities? Sale of the bank as a whole or of only certain assets? Status quo, betting on an upcoming drop in interest rates? Rumors abound since about possible solutions but without any official announcement. The scenario of a takeover of the establishment by the authorities before the resale of the assets at a reduced price is one of the most likely. The authorities, however, may be reluctant to save a third bank in a short time.