(New York) The American regional bank First Republic plunged again on Friday on Wall Street after a short respite, the rumors of a strategy or a bailout plan multiplying without however materializing for the moment.
Latest: according to wall street journalthe American agency responsible for guaranteeing bank deposits, the FDIC, could take control of the bank this weekend and then resell its assets to another establishment.
JPMorgan Chase and PNC Financial Services are among the companies interested, adds the business daily, citing sources familiar with the matter.
The action of First Republic has in any case ended down 43% on the New York Stock Exchange Friday, to 3.51 dollars, after being suspended several times during the session for excessive volatility.
This values it at $654 million, down from over $20 billion at the start of the year and over $40 billion at its peak in November 2021.
Founded in 1985, based in San Francisco with agencies primarily located in California and urban east coast areas, and serving affluent customers, First Republic was at the end of 2022 the 14e largest bank in the country by size of assets.
But its fate has been pending since the close failures of three American banks with similar profiles at the beginning of March, that is to say concentrated on a particular clientele and/or geographical area.
The authorities and other financial institutions soon came to its rescue to prevent it from experiencing the same fate as Silicon Valley Bank and Signature Bank, namely bankruptcy after sudden massive withdrawals from their customers.
First Republic confirmed late Monday that many of its customers also withdrew deposits, totaling more than $100 billion in the first quarter.
She was able to count on the 30 billion brought by the other banks in her accounts but it is insufficient in the eyes of the investors, who made the action plunge on Tuesday and Wednesday before giving her a break on Thursday.
Status quo ?
The management presented some measures on Monday evening to strengthen the financial health of the bank. She also pointed out that she was studying “strategic options” but without giving many details.
Intervention of the authorities? Sale of the bank as a whole or of only certain assets? Status quo, betting on an upcoming drop in interest rates? Rumors abound since about possible solutions but without any official announcement.
For Alexander Yokum, of the CFRA firm, the scenario of a takeover of the establishment by the authorities before the resale of the assets at a reduced price is one of the most likely.
The authorities, however, may be reluctant to save a third bank in a short time.
The problem is also that with SVB and Signature Bank, the FDIC has prompted the idea that all deposits are protected, including those beyond the $250,000 legal limit, when it has none. legally the authority, noted Sheila Blair, former boss of this agency.
But if the FDIC doesn’t, “it could surprise people and be disruptive,” she added when asked on CNBC about a risk of contagion to the rest of the banking industry.
The hypothesis of a repurchase of certain assets by other banks without intervention of the authorities is possible but also faces significant obstacles, insofar as a majority of the loans granted by First Republic are fixed rate mortgages, which have therefore lost value with the recent rise in interest rates, explains Alexander Yokum.
The scenario of a simple takeover by another bank is, for a similar reason, unlikely in his view: the new owner should immediately integrate into his accounts the fact that the assets of First Republic linked to fixed rates such as mortgages or treasury bills have lost value.