Topline
Federal agencies are engaged in “urgent” meetings to discuss measures to rescue First Republic Bank, Reuters reported, after the lender’s recent earnings report—which disclosed worse-than-expected outflows of assets—raised fears that it may become the third major U.S. bank to collapse this year.
A security officer walks outside of a First Republic Bank location in San Francisco, Wednesday.
Key Facts
Citing three unnamed sources, Reuters reported that the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation have met with several financial companies to hammer out a deal to provide a “lifeline” to the lender.
While the bank has been independently seeking its own rescue deal, the report notes that the involvement of government agencies has drawn attention from more companies, including banks and private equity firms.
The report adds that the level of the government’s involvement in the final deal is unclear at the moment.
First Republic told Reuters that they are engaged in discussions with “multiple parties” about “strategic options.”
After cratering massively earlier this week, First Republic shares are up more than 10% in pre-market trading early on Friday.
News Peg
Earlier on Thursday, Press Secretary Karine Jean-Pierre said the White House was monitoring the situation surrounding First Republic Bank and was ready to step in if the need arises. Jean-Pierre reiterated comments by Biden administration officials that the U.S. banking system remained “sound and resilient” after “decisive and forceful” action was undertaken following last month’s dual collapses. She added that the administration has used important tools to stabilize the banking system. and “could use those tools again if needed.”
Key Background
Earlier this week, First Republic reported a sharp increase in the outflow of assets in its quarterly earnings report, causing its stock to plummet to an all-time low. The lender’s net deposits had seen a 41% decline and stood at $105 billion at the end of the first quarter of 2023. This was significantly worse than analyst predictions that the bank held $135 billion in deposits. First Republic’s sharp fall in deposits came despite the infusion of $30 billion in deposits into the bank by a group of 11 larger lenders. The infusion of cash was an effort to shore up depositor confidence and stave off a run on the bank. Bloomberg reported that the bank was looking to sell anywhere between $50 billion and $100 billion in debt securities to help shore up its finances. Last month federal regulators were forced to step in and secure all deposits at Silicon Valley Bank and Signature Bank after their dramatic collapse raised fears of a wider contagion in the banking sector.
Further Reading
U.S. officials lead urgent rescue talks for First Republic – sources (Reuters)
First Republic Stock Crashes To All-Time Low As Biden Officials Reportedly Scramble To Save Bank (Forbes)
Source: https://www.forbes.com/sites/siladityaray/2023/04/28/federal-agencies-reportedly-helping-with-first-republic-banks-rescue-plan/