First Republic Bank: What’s next?

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on the verge.

The fall in First Republic Bank shares halted on March 16. reports Banks including JPMorgan Chase, Citigroup and Wells Fargo were suddenly ready to pump a combined $30 billion into the troubled lender.

after slipping more than 30% in pre-market tradingbegan to stabilize on the stock of the First Republic news of possible rescue and rose more than 3% to $32.13 in afternoon US trade. Shares are still down about 74% since the beginning of March.

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The fate of the California-based full-service bank and wealth management hangs in the balance following the recent collapse of another mid-sized bank, Silicon Valley Bank (SVB), which marked second biggest bank failure in US history, and the closure of crypto lenders Silvergate and Signature Bank.

SVB and Signature collapse after depositors are created Withdrawal request Bank could not complete. Like SVB, first republic customers Includes wealthy customers and companies whose deposits exceed the threshold for federal insurance. On March 12 the bank announced that it received additional liquidity from JP Morgan and the Federal Reserve.

First Republic’s credit rating junked

To calm nerves, Executive Chairman Jim Herbert—who founded the bank in 1985 and serves as CEO until 2022—told CNBC’s Jim Cramer on March 13 that the bank was not seeing outflow, Despite assurances, there is concern that the First Republic may experience a similar go on deposit S&P Global Ratings and Fitch Ratings downgraded the bank’s rating to “trash, These downgrades came a day after Moody’s, another ratings firm, placed First Republic and six other banks under review.

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Wary of a potential liquidity crunch, the San Francisco-based is exploring strategic options, including a possible sale. Bloomberg reported yesterdayThe spark of the recent decline in share prices.

Charted: Shares of First Republic Bank plunged


Financial health of First Republic Bank, by the numbers

212 billion dollars: Bank assets at the of 2022

$176.4 billion: Bank deposits as at the of the previous year

About 70%: The portion of bank deposits that are uninsured because they exceed the $250,000 Federal Deposit Insurance Corporation (FDIC) insured limit—the maximum amount depositors can receive in the event of a bank failure. This is above the average of 55% for mid-sized banks and the third highest in the category after Silicon Valley Bank and Signature Bank, both of which had 97% and 90% uninsured deposits respectively.

61%: Here’s how bank shares have tumbled over the past week on fears it will be the next domino to fall in the looming US banking crisis

Over $70 billion: The bank’s unused liquidity – cash that could be used to respond to potential customer withdrawals – courtesy “the ability to borrow additional from the Federal Reserve, access to funding through the Federal Home Loan Bank, and JPMorgan Chase & Co. ability to access additional financing through the company.” which in turn “enhances, diversifies and further strengthens First Republic’s existing liquidity profile”, according to the company. Even though 40% of the bank’s depositors made withdrawals yes, this funding will cover it, gary alexander saysFinancial blogger at Seeking Alpha.

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Will First Republic Bank collapse?

While First Republic Bank and SVB are similarly sized banks with wealthy clients, their balance sheets tell a very different story.

“First Republic has more than 2x the loan volume of SVB, and less than a quarter of its loan exposure,” wrote Alexander of Seeking Alpha. “This means that First Republic is weighted more toward longer-term assets that are not as exposed to short-term interest rate risk and depreciation as quickly.”

Unlike SVB, change in interest rates The impact on the First Republic would be minimal.

Quotable: US Treasury Secretary Janet Yellen says US banking system is “sound”

“I can assure committee members that our banking system remains sound and that Americans can have confidence that their deposits will be there when they need them. This week’s actions demonstrate our steadfast commitment to ensuring that Demonstrate that depositors’ savings are safe. Importantly, no tax payer’s money is being used or put at risk by this action. -US Treasury Secretary Janet Yellen prepared remarks ahead of a Senate Finance Committee hearing today (March 16).

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