First Republic Bank Faces Stock Decline Amid Receivership Concerns

First Republic Bank is experiencing a significant decline in its stock value following a CNBC report suggesting that the bank might be heading for receivership under the US Federal Deposit Insurance Corporation (FDIC). This news exacerbates the ongoing rout, leading to a 75 percent loss in the stock’s value over the week. The San Francisco-based lender, grappling with a deposit slump of over $100 billion in the first quarter, could become the third US bank to collapse since March.

On Friday, the stock witnessed a more than 50 percent drop, reaching a record low of $2.99, prompting multiple halts in trading. The bank’s market capitalization hit nearly $557 million at its lowest point, a stark contrast to its peak valuation of over $40 billion in November 2021. Short sellers have increased their bets against the bank, reaching $376 million, up by $63 million over the past 30 days, as reported by Ihor Dusaniwsky, managing director at analytics firm S3 Partners.

Earlier in the session, a Reuters report hinted at a potential government-brokered rescue deal for First Republic, temporarily boosting its shares by up to 6.6 percent. The FDIC, Treasury, and Federal Reserve are reportedly engaging in discussions with financial entities about providing a lifeline for the troubled bank. The government’s involvement has attracted additional participants, including banks and private-equity firms, to explore potential solutions.

Mark Haefele, chief investment officer at UBS Global Wealth Management, commented on the situation, stating that while the worst-case scenario concerning the collapse of Silicon Valley Bank seems to have been averted, the challenges at First Republic serve as a reminder that further issues could arise in the financial sector.

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