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By Thomas Kika
Weekend Staff Writer
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The value of shares in First Republic Bank plummeted to a historic low on Monday as continued withdrawals from customers have destabilized the institution.
First Republic is among the financial institutions in the U.S. facing instability in the wake of the recent collapse of Silicon Valley Bank (SVB). Once the go-to bank for startup businesses, SVB failed after customers, spooked by reports about the institution selling long-term securities at a loss due to rising interest rates, began a run on deposits, forcing regulators to step in, resulting in the second-largest bank collapse in American history.
On Monday, First Republic's stock plunged by over 47 percent to a low of around $11.52 per share, resulting in multiple trading halts due to volatility. The bank's stock lost roughly 90 percent of its value compared to one month prior, according to Forbes. High-ranking executives at the bank reportedly sold off $12 million in company stock in the two-month period leading up to its current predicament. It has also seen its credit rating downgraded twice in the past week by S&P Global.
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Since panic began to sweep the financial markets in the wake of SVB's failure, First Republic customers reportedly withdrew around $70 billion in deposits, approximately 40 percent of the institution's total. The bank received an infusion of $30 billion from a group of 11 other banks to "ease immediate liquidity pressures," though an analyst for S&P said that this might not be a solution for its "substantial long-term challenges."
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Monday's stock freefall came in the wake of a report from The Wall Street Journal saying that JPMorgan was looking to put together a rescue plan for First Republic. One of the ideas floated involved converting the $30 billion investment from the 11 other banks into shares, which would dilute the value of existing shares. A sale of the beleaguered financial institution is also reportedly on the table.
Neither JPMorgan nor First Republic responded to the Journal's request for comment on the proposed rescue plan, though the latter did claim that it was "well positioned to manage short-term deposit activity."
Some analysts, however, remain uncertain about First Republic's ability to bounce back.
"Investors are skeptical First Republic will be able to attract any deposits, which will likely remain a problem for small and medium-sized banks," Ed Moya, senior analyst at Oanda, wrote in a memo to clients on Monday.
Newsweek has reached out to First Republic Bank's press office via email for comment.
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