The year 2023 will forever be etched in financial history as the year the US banking system faced one of its most significant challenges. The unexpected collapse of three major banks – First Republic Bank, Silicon Valley Bank, and Signature Bank – sent shockwaves through the financial world, affecting not just the American economy but global markets as well. On May 1, 2023, First Republic Bank (FRB) experienced the second most significant bank collapse in U.S. history. Shortly after its downfall, the majority of its operations were acquired by JPMorgan Chase, following intervention by federal authorities. This incident came on the heels of the failures of two other prominent regional banks, Silicon Valley Bank and Signature Bank. Notably, all three banks held substantial uninsured deposits. However, following JP Morgan’s support, customers are wondering whether keeping money in the bank is safe. Moreover, there’s a rising concern regarding the FRC stock price as it was removed from the stock exchange in May. However, customers with funds at First Republic Bank were relieved to discover their money was secure following the bank’s collapse and subsequent takeover by JPMorgan Chase. Typically, funds in an FDIC-insured bank account are deemed safe up to the $250,000 FDIC coverage limit. However, for amounts exceeding this limit, there’s no guarantee of full recovery if a bank goes under. In this article, we’ll explore FRC stock price, its market performance and future price prediction from FRC stock price prediction.
First Republic Bank: Current Status
Based in San Francisco, First Republic Bank catered primarily to affluent clients. In 2023, it shuttered its operations and was subsequently taken over by JPMorgan Chase. A significant factor contributing to its downfall was the vast amount of its deposits that went beyond the Federal Deposit Insurance Corp. (FDIC) coverage limit.
The FDIC insures up to $250,000 for each depositor per type of account. This means that in the event of a bank’s failure, the deposits are safeguarded up to this threshold. However, sums exceeding this limit typically fall outside the safety net.
Data analysis from S&P Global Market Intelligence revealed that, as of December 2022, a staggering 67.4% of First Republic’s deposits were not insured. The subsequent collapses of Silicon Valley Bank and Signature Bank heightened anxieties among First Republic’s clients with uninsured funds. This led to a massive withdrawal of deposits, further destabilizing the bank.
Before its downfall, First Republic held deposits amounting to $103.9 billion and assets valued at $229.1 billion. JPMorgan Chase stepped in, acquiring the lion’s share of these assets and subsequently rebranding 84 branches across eight states, which resumed operations on May 1, 2023. This ensured that First Republic’s clientele experienced no service disruption, and all their funds, including those uninsured, remained intact.
According to a statement by the Federal Deposit Insurance Corp., “JPMorgan Chase Bank, National Association, Columbus, Ohio has taken over all deposits of First Republic Bank, San Francisco, California.”
The closure of First Republic was the third such incident in 2023, following Silicon Valley Bank and Signature Bank, as per the Federal Reserve’s records of failed banks. Collectively, these three banks held assets worth $548.5 billion. This figure surpasses the total assets of all banks that failed in 2008, during the peak of the financial meltdown.
First Republic Bank: History And Collapse
First Republic, established in February 1985 by Jim Herbert, began as a California-chartered industrial loan company. By August 1986, it went public on the Nasdaq at $10 per share. In the 1990s, it transitioned from a thrift to a state-chartered bank, First Republic Savings Bank, after acquiring Silver State Thrift and lobbying for legislative changes in Nevada.
Over the years, First Republic made several acquisitions, including Trainer Worthman & Co., Starbucks, Tisdale & Associates, Froley, Revy Investment Company Inc., Bay Isle Financial’s Private Client Asset Management division, and Bank of Walnut Creek.
In 2007, Merrill Lynch acquired First Republic for $1.8 billion. However, in 2010, after Bank of America’s acquisition of Merrill Lynch, First Republic was sold to private investors, including Colony Capital and General Atlantic, for about $1 billion. By December 2010, First Republic re-entered the public market, raising $280.5 million through an IPO.
In subsequent years, First Republic acquired several firms, including Luminous Capital, Constellation Wealth Partners, and Gradifi, a startup assisting employees with student loan repayments. In 2018, they invested in student loan financier CommonBond and expanded their office space in New York’s Rockefeller Center. However, in 2019, 50 client advisors from the Luminous acquisition left the company.
Why Did First Republic Bank Fail?
First Republic Bank’s failure mirrored the challenges faced by Silicon Valley Bank (SVB) and Signature Bank, primarily due to a substantial volume of uninsured deposits and liquidity issues. Like SVB, First Republic catered to Silicon Valley startups, many of which held balances exceeding $250,000, as highlighted in news reports.
Several factors exacerbated the bank’s situation:
- Uninsured Deposits: A surge in uninsured deposits can trigger a bank run during investor panic. Over 67% of First Republic’s deposits were uninsured as of December 2022, reflecting its affluent clientele.
- Liquidity Concerns: The bank’s main revenue came from net interest income on loans and investment securities. A significant portion of its investments were tied up in less liquid real estate loans and municipal securities, which didn’t yield competitive interest rates. By December 2022, among mid-sized banks, First Republic had the highest ratio of loans and securities to uninsured deposits.
- Credit Rating Downgrades: Repeated downgrades from credit agencies, despite financial support, raised concerns about the bank’s liquidity, funding, and profitability. For instance, S&P Global Ratings downgraded First Republic Bank, citing these concerns.
- Distrust in Regional Banks: The earlier failures of Silicon Valley Bank and Signature Bank, coupled with credit rating downgrades, made investors wary of holding uninsured deposits in regional banks.
In response to the declining trust and dwindling deposits, First Republic sought assistance from the Federal Home Loan Bank Board (FHLB) and the Federal Reserve. It also secured a $30 billion cash boost from a group of 11 banks. Despite these efforts, its stock value plummeted from $122.50 on March 1, 2023, to a mere $1 by May 2023.
FRC Stock: Price History
Founded in 1985, First Republic Bank made its foray into the public market a year later. In August 1986, it debuted on the Nasdaq, with stocks priced modestly at $10 a share. This initial offering was showcasing the bank’s potential, with investors keenly watching its focus on high-net-worth clients and personalized banking services. The 1990s saw First Republic Bank expanding its horizons. With strategic acquisitions and a shift to a banking charter, the bank’s stock began to reflect its growing stature in the industry. The acquisition of Silver State Thrift and the subsequent transition to a state-chartered bank, First Republic Savings Bank, boosted investor confidence, leading to a steady uptick in stock prices.
The new millennium brought with it a mix of opportunities and challenges. While the bank continued its acquisition spree, purchasing firms like Trainer Worthman & Co. and Starbucks, Tisdale & Associates, the global financial landscape was shifting. The 2007 acquisition by Merrill Lynch for a whopping $1.8 billion was a significant milestone, but the subsequent financial crisis and the sale to Bank of America added volatility to the stock prices.
2010 marked a turning point. First Republic was sold to private investors, and by December, it re-entered the public market, raising $280.5 million through an IPO. FRC stock was trading on the NYSE at a price of $27.4. However, the price declined toward $23 by 2011 mid, attracting new investors to buy in the dip. The stock price then again climbed and made an exponential surge this time. FRC stock price touched a peak of $55 in July 2014 and then witnessed a minor resistance and declined to $47. With minor fluctuations, the FRC stock price again surged and reached the $100 mark in 2017’s September. However, it had declined below $90 in 2019 but later touched a high at $115 before the Covid pandemic.
Due to COVID-19, FRC stock declined to $80 as investors heavily liquidated their assets. However, this opened up a lucrative opportunity for buyers to hop into the dip. Following this, FRC stock price witnessed a robust recovery in the next few years and reached a high of $220 in 2021. Since then, the price continued to decline as it reached a low of $136 in 2022 and later, in 2023’s March, it crashed toward $1 due to US banking collapse.
As of now, FRC stock can’t be traded, and it is not listed on any exchanges. Moreover, the shareholders are wiped out, according to JP Morgan, making it impossible to execute a technical analysis.
FRC Stock Price Prediction By Blockchain Reporter
FRC Stock Price Prediction 2023
In 2023, FRC’s stock price is anticipated to average around $0.2. The minimum is projected at $0.08, while the maximum could soar to $0.5. These predictions are rooted in JP Morgan’s acquisition of First Republic Bank, which has not only safeguarded users’ funds but also instilled a renewed sense of trust among existing and potential customers.
FRC Stock Price Prediction 2024
As we move into 2024, FRC’s stock price is expected to witness a positive uptrend, with an average of approximately $3.2. The year might see a low of $3 and a peak of $3.5. The continued trust and influx of customers, post the JP Morgan acquisition, will likely be the driving force behind this growth.
FRC Stock Price Prediction 2025
By 2025, the stock price for FRC is projected to average around $6.5. The potential minimum for this year could be $6.2, while the maximum might touch $7. This growth can be attributed to the bank’s consistent efforts to expand its customer base and the continued trust it garners in the market.
FRC Stock Price Prediction 2026
Heading into 2026, FRC’s stock price is predicted to maintain a steady rise, averaging at about $10. The year’s low is expected to be around $9.5, with a potential high of $11. The bank’s strategic initiatives to enhance customer experience and its robust growth trajectory post-acquisition will play pivotal roles in this positive shift.
FRC Stock Price Prediction 2027
For 2027, FRC’s stock is forecasted to average around $14, with a minimum of $13.5 and a maximum reaching up to $15. The bank’s consistent growth, coupled with its commitment to ensuring customer trust and satisfaction, will be the primary drivers behind this upward trend.
FRC Stock Price Prediction 2028
In 2028, the stock price for FRC is projected to hover around an average of $18, with potential lows and highs at $17.5 and $19, respectively. The bank’s continued focus on innovation and customer-centric services will likely fuel this growth.
FRC Stock Price Prediction 2029
By 2029, FRC’s stock price is anticipated to average at about $22, with a potential low of $21.5 and a high of $23. The bank’s consistent efforts to adapt to changing financial landscapes and its commitment to its clientele will be key growth factors.
FRC Stock Price Prediction 2030
Rounding off the decade, in 2030, FRC’s stock is projected to maintain an average of around $26. The year might see a minimum of $25.5 and a peak of $27. The bank’s strategic vision, combined with its efforts to continually enhance its offerings, will be instrumental in achieving this growth.
FRC Stock Price Forecast: By Experts
Wall Street experts monitoring First Republic Bank have become the most pessimistic about the bank since its IPO over ten years ago. A significant drop in deposits has triggered a series of downgrades, pushing the stock to its lowest-ever value.
Analysts’ sentiment and consensus ratings have shown interesting shifts. Initially, FRC sentiment and its price target surged prior to the downturn. The sentiment transitioned from a Hold to a Moderate Buy, with a price target exceeding $200. This uptrend was influenced by a promising growth forecast and a favorable valuation. However, the tide has turned. Analysts have been revising their ratings and price targets downward, with significant reductions in price targets, yet they remain invested in the stock.
The prevailing consensus now leans towards a solid Hold. Notably, Marketbeat.com’s monitoring page hasn’t displayed any sell ratings for this year or the previous one, indicating strong belief. While some in the market consider this stock a potential sell, no Wall Street analysts have expressed bearish sentiments.
For those with a bullish inclination, the price target presents an even more compelling narrative. Despite declining by over 30% after the bank’s crisis, it still suggests that the stock holds a value above $100, with potential growth close to 1,000%. The consensus experienced a sharp drop after the downturn but has remained consistent thereafter.
Will FRC Stock Recover?
A May report by CBS News, referencing a JPMorgan spokesperson, stated that FRC stockholders would not be receiving shares in JPMorgan. This implies that FRC stockholders have probably faced significant losses due to First Republic’s downfall, bearing the full impact of their stock investment.
The FDIC’s insurance fund will prioritize general trade creditors followed by unsubordinated debt holders. As an FDIC spokesperson informed CBS, “Shareholders are at the end of the queue if any proceeds remain.” In straightforward terms, FRC’s chances of recovery are bleak. The bank has been shut down by the FDIC, with its assets acquired by JPMorgan. While there’s a slim chance that the over-the-counter FRC stock (listed as FRCB) might recoup some losses, it remains a distant possibility.
Conversely, it’s noteworthy that JPMorgan Chase (JPM) stock has seen a significant rise post the First Republic acquisition. From a trading price of $127 in April, JPM’s stock has surged to $145, marking an increase of over 15% within this span. Thus, investing in JPMorgan appears to be a more prudent choice currently.
Conclusion
In early 2023, First Republic Bank was among several regional banks that faced failure, largely due to bank runs. These were exacerbated by the substantial amount of uninsured deposits they held, coupled with financial challenges stemming from the prevailing interest rate landscape.
For the security of your funds, it’s advisable to maintain a balance below the FDIC insurance cap of $250,000 in your bank account. If you have a larger sum to deposit, consider opening an account with another bank. The aftermath of the First Republic’s downfall offers little hope for FRC’s resurgence. The stock isn’t listed on primary exchanges, and the bank’s closure led to JPMorgan acquiring its assets. Candidly, the prospects of FRC bouncing back seem bleak.
Though the initial months of 2023 brought turbulence to the banking industry, the market has since found its footing. The Federal Reserve’s recent decision to halt rate increases has bolstered investor confidence, suggesting that the economy is on an upward trajectory and dispelling fears of a 2023 recession.
Source: https://blockchainreporter.net/frc-stock-price/