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First Republic Plummet Nearly 50%, for the 2nd Time This Week, Over Possible FDIC Receivership

First Republic Bank shares fell nearly 50% over a report on possible takeover by FDIC.

After a report stated that the troubled lender was most likely going to be placed under the supervision of the United States Federal Deposit Insurance Corporation (FDIC), First Republic Bank shares fell once more to a record low on Friday, losing nearly 50% of their value.  

Since the bank disclosed earlier this week that it had lost more than $100 billion in deposits in the first quarter, the stock has been in a free fall. Fears of a bank run, since a sizable amount of the lender’s deposits are uninsured, caused the bank’s stock market value to drop by over 80% earlier in March as well. Trading eventually came to an end on Friday as rumours of a takeover by regulators grew. 

First Republic’s plunge has wiped out more than $21 billion in market value this year, making it the smallest S&P 500 Index member by value. The shares of the bank fell to an all-time low of $3.09 as of 11.44 am in New York and closed at $3.51 apiece, 43.3% lower from the previous close. 

This occurred after shares previously increased by as much as 6.6% on news of talks to develop a strategy for the bank. Meetings were scheduled between US authorities, and the FDIC, Treasury Department, and Federal Reserve were in charge of setting them up, according to unnamed sources. Most likely, First Republic Bank will be placed under FDIC receivership.

To support the First Republic, several of the biggest US banks have already put up $30 billion in deposits, and they have shied away from getting more involved and possibly pouring good money after bad.

The bank revealed figures on Monday that showed how precarious its position had grown as a result of the demise of SVB and Signature Bank. Although the bank’s executives stated that it has a sufficient amount of cash reserves, this does not seem to have greatly reassured the general population. In the first quarter, customers withdrew $102 billion in deposits, more than half of the $176 billion it held at the end of 2022, according to the financial report. The Federal Reserve and government-backed lending organisations accounted for the majority of the $92 billion in borrowings the bank made in the first quarter. 

Ever since the failure of SVB sparked worries about the stability of other regional banks in the US, First Republic has been under pressure. First Republic is expected to incur losses for at least a year as a result of having to pay more for funding than many of its assets are worth. 

Additionally, First Republic had stated that it intended to reduce its workforce by as much as a quarter and reduce executive compensation by an unspecified amount.

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