First Republic Bank: what's next?

on the edge.

A slide in First Republic Bank shares came to a halt on March 16 reports that banks like JPMorgan Chase, Citigroup and Wells Fargo were willing to pump a combined $30 billion into the suddenly troubled lender.

After slipping more than 30% in premarket tradingFirst Republic stock began to stabilize News of a possible rescue and was up more than 3% to $32.13 in US afternoon trade. Shares are still down nearly 74% since early March.

The fate of the California-based full-service bank and wealth management firm hangs at stake following the recent collapse of another mid-tier bank, Silicon Valley Bank (SVB). second largest bank failure in US history and the shutdown of crypto lenders Silvergate and Signature Bank.

SVB and Signature collapsed after depositors made Withdrawal Requests the banks could not meet. like SVB, First Republic’s clientele includes high net worth clients and corporations whose deposits exceed the federal insurance threshold. On March 12th, the bank announced that it received additional liquidity from JPMorgan and the Federal Reserve.

First Republic’s credit rating has been downgraded to junk

To calm nerves, Chief Executive Officer Jim Herbert, who founded the bank in 1985 and served as CEO until 2022, told CNBC’s Jim Cramer on March 13 that the bank was not experience oversized drains. Despite the assurances, there are concerns that First Republic could experience something similar run on deposits resulted in S&P Global Ratings and Fitch Ratings downgrading the bank’s ratings to “Garbage.” The downgrade came a day after another rating agency, Moody’s, began scrutinizing First Republic and six other banks.

The San Francisco-based company has been reviewing strategic options, including a possible sale, in light of a possible liquidity crisis. Bloomberg reported yesterdaywhich triggered the recent price decline.

Noted: First Republic Bank shares are falling

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First Republic Bank’s financial health in numbers

$212 billion: The bank’s assets at the end of 2022

$176.4 billion: The bank’s deposits at the end of last year

About 70%: Percentage of the bank’s deposits that are uninsured because they exceed the Federal Deposit Insurance Corporation’s (FDIC) insurance limit of $250,000 — the maximum amount depositors can recover in the event of a bank failure. It’s above the median of 55% for midsize banks and is the third-highest in the category after Silicon Valley Bank and Signature Bank 97% and 90% uninsured deposits or.

61%: How much the bank’s shares have fallen over the past week as there are many fears it will be the next domino to fall in the burgeoning US banking crisis

More than $70 billion: The bank’s untapped liquidity — cash it can use to respond to potential customer withdrawals — thanks to “the Federal Reserve’s additional borrowing capacity, continued access to funding from the Federal Home Loan Bank, and the ability to access additional funding.” by JPMorgan Chase & Co. ” which in turn “increases, diversifies and further strengthens First Republic’s existing liquidity profile,” according to the company. Even if 40% of the bank’s depositors were to exit, this funding would cover says Gary AlexanderFinancial blogger at Seeking Alpha.

Will the First Republic Bank collapse?

While First Republic Bank and SVB are similarly sized banks with affluent customers, their balance sheets tell very different stories.

“First Republic has more than double SVB’s credit volume and less than a quarter of its credit exposure,” wrote Seeking Alpha’s Alexander. “This means First Republic is more weighted towards longer-dated assets that are less exposed to near-term interest rate risk and devaluations.”

In contrast to the SVB Changes in Interest Rates will have less impact on First Republic.

Quotable: US Treasury Secretary Janet Yellen says US banking system is ‘solid’

“I can assure the members of the committee that our banking system remains sound and that Americans can be confident that their deposits will be there when they need them. This week’s actions demonstrate our determination to ensure depositors’ savings remain safe. It is important that no tax money is used or put at risk in this campaign.” – that of US Treasury Secretary Janet Yellen prepared remarks before a Senate Finance Committee hearing today (March 16).