Yesterday, First Republic Bank’s stock price fell more than 49% on the stock market, and has collapsed more than 93% in less than two months. Will the Californian bank be the next to fail?
Firt Republic Bank loses 93% in less than 2 months
After the banking crisis that came straight from the United States in March, a new player seems to see its future compromised: First Republic Bank. Indeed, the difficulties are piling up for the Californian bank, and Tuesday’s trading session saw its stock fall 49.38%.
In addition, the stock is down more than 93% since the beginning of March, which amounts to more than $42 billion of capitalization erased, for a stock that is now valued at less than $2.93 billion:
As a result, the bank is in financial trouble, despite a rescue plan in March that saw 11 banks inject $30 billion in cash to avoid a Silicon Valley Bank (SVB) scenario.
The bank faces massive withdrawals
Financial Times reports that First Republic Bank customers have withdrawn some $100 billion in deposits since last month.
People from the White House, the Federal Reserve (FED) and the Treasury Department have approached the bank recently to try to find a solution. In addition, the Federal Deposit Insurance Corporation (FDIC) may take control of the situation to protect customers’ assets, as it did with SVB and Signature Bank last month.
According to Bloomberg, the bank is considering divesting $50 billion to $100 billion of assets in an attempt to get out of the crisis. On the other hand, customer deposits, which had been estimated at $137 billion, were announced on Monday well below expectations at $104.5 billion.
Thus, the future of First Republic Bank is uncertain, and the coming days will be decisive to act the rescue or the bankruptcy of the bank.
It should be noted that this bank run may cause a systemic risk due to the multitude of commercial links between the banks. Last month, a study revealed that no less than 186 banks had a similar model to SVB.
As a side note, the price of Bitcoin has risen slightly by 3.5% in the last 24 hours, after a few days of correction. The asset is now trading at around $28,400.