First Republic on brink as hope fades

Troubled First Republic was on the brink of bankruptcy last night as its shares soared to an all-time low.

Officials in the United States have been trying in recent days to orchestrate a bailout by Wall Street’s big banks.

But the outlook for the US lender appears to have deteriorated.

Yesterday, news outlet CNBC reported that the San Francisco bank would instead most likely go into receivership under the US Federal Deposit Insurance Corporation (FDIC), an industry-funded lifeboat.

That could make it the latest U.S. lender to fall victim to a crisis that has already claimed the scalps of Silicon Valley Bank, Signature and Silvergate — as well as European giant Credit Suisse.

Shares of First Republic were repeatedly suspended during volatile trading yesterday, falling more than 50 percent at one point. They are down 97 percent so far.

It was previously granted a stay of execution when a consortium of major Wall Street banks agreed to inject £24bn in deposits to avoid a damaging collapse that threatened to send shockwaves to the rest of the industry.

But the bank came under further pressure this week after first-quarter results revealed the magnitude of an exodus of customers that saw – beyond the impact of deposits injected from larger lenders – £80bn in funds. was withdrawn.

Last night, US officials coordinated urgent talks to save the First Republic with a private sector effort — which could involve selling off assets or creating a “bad bank” to divest toxic assets — which would not yet come to fruition .

The FDIC, the US Treasury Department and the Federal Reserve are among the government agencies that have organized meetings with companies in an attempt to reach a deal. Officials see a deal with the private sector as preferable to one where it goes into FDIC receivership.

But CNBC reported that the latter was most likely.

That would mean that the FDIC takes on any losses from assets such as loans and bonds, whose value has fallen due to rising interest rates.

The money would be recovered from the US banks that pay into the FDIC insurance scheme.

A First Republic spokesperson said, “We are in multi-party discussions regarding our strategic options as we continue to serve our customers.”

Danni Hewson, head of financial analysis at broker AJ Bell, said: “The ongoing concern about First Republic is a constant reminder that the industry is under pressure and the news earlier this week that there was more than $100 billion in deposits from the bank withdrawn. shuddering back through the markets.

“Can a deal be struck to give the beleaguered bank a lifeline? That has certainly been the hope, but there are serious doubts about its viability.’

Amid the ongoing turmoil, the Fed released a report last night on its own failures leading up to SVB’s collapse last month. The 114-page dossier concluded that the failure “exposed regulatory and supervisory weaknesses that need to be addressed,” said Michael Barr, the central bank’s top supervisor.

Regulators closed the California lender on March 10 after a massive bank run caused £33 billion to be withdrawn in a single day.