Sharp sell-off in First Republic shares causes alarm in Washington

Shares of First Republic continued to plunge on Tuesday as regulators in Washington and financiers on Wall Street scrambled to come up with a plan to stabilise the ailing bank.

The California-based lender’s stock price, which is down by more than 93 per cent this year, fell by a further 49.4 per cent, a day after it revealed its customers had withdrawn $100 billion (€91 billion) of deposits during last month’s turmoil.

First Republic on Monday said it was pursuing “strategic options”, but multiple people briefed on the situation said it was struggling to come up with a viable solution, such as a sale of all or part of the bank.

Those briefed about the situation said the bank was in touch with the US government, which is on high alert following the failure of Silicon Valley Bank (SVB) and Signature Bank last month.

Apple iPad Pro 13-inch: Powerful device and a rival to laptops for many tasks

---

IBM and Jacobs announce 900 new jobs

---

Activists and short-sellers zoning in on Newry tech firm

---

The Irish Times Innovation Awards 2024: Everything you need to know

---

They said the leading options are for some of the large US banks that recently deposited $30 billion into First Republic to rescue the lender, or for the Federal Deposit Insurance Corporation to take control of the institution and offer a government guarantee for all deposits, as it did with SVB.

A person close to First Republic said the bank would welcome the government “convening the relevant parties to come up with a solution”.

Officials from the White House, the Federal Reserve and US treasury have been in contact with First Republic recently, according to sources, as the Biden administration becomes increasingly concerned that the bank is running out of time to reassure depositors and investors.

The treasury declined to comment.

With only three big banks left, are Irish consumers bereft of choice?

Listen | 34:00

One of the people familiar with the situation said that the government was not concerned about contagion beyond First Republic. Despite the sharp slide in First Republic’s shares on Tuesday, the KBW regional bank index was down less than 4 per cent. That suggests investors are also more relaxed for now than they were when SVB collapsed and sparked a sector-wide sell-off.

Shares in PacWest, a California bank that has been under pressure since SVB’s collapse, jumped 16.2 per cent in after-hours trading after it reported $1.8 billion in deposit inflows since March 20th.

The sell-off in First Republic’s stock followed a poorly-received earnings release and investor call on Monday evening, during which executives refused to take questions from analysts and withdrew financial guidance for the rest of the year.

First Republic has been hunting for buyers for parts of its business for weeks but has struggled to drum up enthusiasm, with potential acquirers citing concerns over taking on too much risk, one of the people said.

Some private equity firms have expressed an interest in acquiring some of First Republic’s assets but the government is wary about the optics of buyout firms benefiting from the recent bout of banking turmoil. – Copyright The Financial Times Limited 2023