What To Know About The Latest Bank On The Brink

Topline

First Republic shares cratered another 30% Thursday as investors digested a report the struggling San Francisco-based regional bank is weighing a sale and received two credit downgrades, with mounting concerns First Republic could soon go the way of its failed peer Silicon Valley Bank.

First Republic is reeling from other smaller banks’ failures.

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Key Facts

First Republic’s stock fell 30% to $22 in early Thursday trading, nearing its lowest share price since going public in 2010, before trading was halted on the New York Stock Exchange.

Shares of the bank are now down 81% since last Wednesday, by far the largest drop of any S&P 500 constituent in the period even as the index dropped 3% while other bank stocks crashed.

First Republic’s sinking share prices come as investors fret over the company’s future following the recent failures of Silicon Valley Bank and Signature Bank and closure of Silvergate Capital.

First Republic’s Sunday message that it secured $70 billion in further liquidity from the Federal Reserve and JPMorgan Chase did little to calm investors or creditors, as S&P Global Ratings and Fitch Ratings each lowered its rating for First Republic to junk on Wednesday.

Bloomberg reported late Wednesday that First Republic is weighing a sale, a drastic move for the bank whose market value sank from as high as $21 billion last week to $4 billion on Thursday.

Big Number

68%. That’s how much of First Republic’s deposits are uninsured by the Federal Deposit Insurance Corporation as they exceed the $250,000 limit, according to S&P Global Ratings. These uninsured deposits are the “most susceptible to withdrawal,” according to the rating agency, after Silicon Valley Bank’s failure left its largest customers in limbo until federal regulators stepped in Sunday.

Key Background

Founded in 1985, First Republic largely caters to high net worth clients and held $176 billion in deposits as of the end of 2022. Shares of fellow regional banks PacWest and Western Alliance tanked 19% and 10% apiece Thursday, with each stock down over 60% since last Wednesday. Though President Joe Biden indicated in a Monday speech the government would likely guarantee even uninsured depositors would get their money back in future failures, shareholders would not get their investments back in a scenario where a bank stock loses its value, contributing to the selloffs as equity investors look to avoid being caught holding the bag. Following Silicon Valley Bank’s stunning and sudden unraveling, customers have reportedly moved billions of dollars in funds from regional banks to large banks such as Bank of America, though the largest bank stocks have been far from immune from suffering losses, with the 10 largest U.S. banks shedding roughly $200 billion in market capitalization over the past week.

Tangent

Long-embattled Swiss bank Credit Suisse secured $54 billion in funding from Switzerland’s central bank early Thursday, helping calm fears that it too could soon go under.

Crucial Quote

“We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the U.S. regional banking sector with more seizures and shutdowns coming,” BlackRock CEO Larry Fink wrote in a Wednesday letter to investors, predicting Silicon Valley Bank’s shutdown could simply be the first “domino to fall” in the American banking system.