FIRST REPUBLIC SHARES HIT RECORD LOW AFTER DEPOSITORS PULL $100BN

Wed 26 Apr 2023:

First Republic Bank’s shares have plunged to a record low after the lender announced that depositors withdrew more than $100bn, prompting fears of further bank collapses after the failures of Silicon Valley Bank and Signature Bank.

First Republic’s stock closed down nearly 50 percent on Tuesday, after the San Francisco-based lender disclosed that it lost 40 percent of its deposits in the first quarter as the banking sector suffered its biggest crisis of confidence since the 2007-2008 financial crash.

First Republic saw its deposits fall by $72bn over the period, a figure that accounts for a $30bn rescue package announced last month by a consortium of 11 banks.

The collapse of Silicon Valley Bank and Signature Bank last month drove fears of contagion across the banking sector, and investors have been closely watching the financial health of regional lenders such as First Republic since.

Other banks in the United States also saw their share price register significant falls, including Western Alliance Bancorporation, Zions Bancorp and JPMorgan.

First Republic said on Monday it was considering “strategic options” to strengthen the bank’s position.

The bank’s recovery plan includes selling off unprofitable assets and laying off up to a quarter of its workforce of about 7,200 employees.

Investors have questioned whether First Republic has a future as either an independent lender or as part of a bigger bank.

Christopher Wolfe, head of North American banks at Fitch Ratings, said any potential buyer of First Republic would be looking at a big write down in the value of the lender’s assets.

“The options are very challenging and probably very costly, especially for shareholders,” Wolfe told the Reuters news agency. “Who’s going to bear the cost?”

SOURCE: AL JAZEERA

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