Biden Admin Scrambles To Respond to Collapse of Another Bank

First Republic Bank Shares Plummet to Record Low

Investors were left reeling on Friday as shares of First Republic Bank took a nosedive, losing almost half of their value in a single day. The sudden drop came after a CNBC report suggested that the troubled lender was likely headed for receivership under the U.S. Federal Deposit Insurance Corporation (FDIC).

The stock plummeted by as much as 46% to $3.33, resulting in a market capitalization of just $620 million. Trading in the bank’s shares was halted multiple times as panic set in.

Government-Brokered Rescue Deal Offers Hope

Earlier in the day, a Reuters report had suggested that a government-brokered rescue deal for First Republic was in the works, which had initially pushed the bank’s shares up by as much as 6.6%. According to the report, the FDIC, the Treasury Department, and the Federal Reserve had begun orchestrating meetings with financial companies to discuss a potential lifeline for the beleaguered bank.

The government’s involvement was helping to bring more parties, including banks and private equity firms, to the negotiating table, one of the sources for the report had told Reuters.

Deposit Declines Raise Concerns

Despite the potential for a rescue deal, concerns remained that deposit declines at First Republic could worsen and spark a fresh meltdown in the U.S. banking industry, even as it recovers from the collapse of two regional lenders last month.

First Republic had reported that its deposits had slumped by more than $100 billion in the first quarter of the year, adding to the sense of unease among investors.

Worst-Performing S&P 500 Stock

The San Francisco-based lender’s stock has more than halved so far this week, and since the start of the year, it has lost nearly 97% in value, making it the worst-performing S&P 500 stock.

“The potential worst-case scenario stemming from the collapse of Silicon Valley Bank appears to have been averted,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note. “But the problems at First Republic are a reminder that further problems remain possible.”

Investors will be watching closely to see how the situation develops in the coming days and weeks.