First Republic Bank witnessed a record-low plunge in its shares after revealing a significant withdrawal of more than $100 billion by depositors. This development has raised concerns about potential bank collapses, following the recent failures of Silicon Valley Bank and Signature Bank.
Closing down nearly 50 percent on Tuesday, First Republic Bank, based in San Francisco, disclosed a 40 percent loss in deposits during the first quarter. The banking sector is experiencing its most significant crisis of confidence since the 2007-2008 financial crash.
First Republic reported a $72 billion decline in deposits for the period, accounting for a $30 billion rescue package announced last month by a consortium of 11 banks.
The recent collapses of Silicon Valley Bank and Signature Bank have fueled fears of contagion within the banking sector. Investors are closely monitoring the financial health of regional lenders like First Republic in the wake of these failures.
Shares of other banks in the United States, including Western Alliance Bancorporation, Zions Bancorp, and JPMorgan, also experienced notable declines.
On Monday, First Republic announced its consideration of “strategic options” to fortify the bank’s position. The recovery plan involves selling unprofitable assets and potentially laying off up to a quarter of its workforce, totaling about 7,200 employees.
Investors are questioning the future of First Republic, whether it can sustain itself as an independent lender or if it might be absorbed by a larger bank. Christopher Wolfe, Head of North American Banks at Fitch Ratings, highlighted the challenges and potential costs associated with any buyer, emphasizing the likelihood of substantial write-downs in the value of the lender’s assets.
“The options are very challenging and probably very costly, especially for shareholders. Who’s going to bear the cost?” Wolfe commented to Reuters.
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