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First Republic Bank Shares Plummet Amid FDIC Receivership Rumors

First Republic Bank's shares nosedive as rumors of an impending FDIC receivership fueled market turmoil and heightened concerns within the banking industry.

First Republic Bank
First Republic Bank

First Republic Bank's (NYSE: FRC) shares tumbled to an all-time low on Friday. A CNBC report suggested that the struggling bank is likely headed for receivership under the U.S. Federal Deposit Insurance Corporation (FDIC). The stock's value dropped by as much as 46%, reaching $3.33 and leaving the bank with a market capitalization of $620 million.

Trading Halted Amid Market Turmoil

First Republic Bank's shares faced multiple trading halts throughout the trading day due to the significant decline. Before this, a Reuters report discussing a potential government-brokered rescue deal had temporarily caused the bank's shares to rise by up to 6.6%.

Government Agencies Plan Lifeline

The FDIC, Treasury Department, and Federal Reserve have reportedly begun organizing meetings with financial companies to discuss potential support for the beleaguered bank. The government's involvement has attracted more parties to the negotiations, including banks and private equity firms.

Deposit Declines Raise Industry Concerns

Despite the ongoing discussions, concerns persist that deposit declines at First Republic could worsen and trigger a new crisis in the U.S. banking industry, even as it recovers from the collapse of two regional lenders last month. The bank reported earlier this week that its deposits had slumped by over $100 billion in the first quarter.

First Republic's Struggles Signal Ongoing Risks

Mark Haefele, chief investment officer at UBS Global Wealth Management, commented that although the worst-case scenario following the collapse of Silicon Valley Bank seems to have been averted, First Republic's issues serve as a reminder that more problems could still arise in the banking sector.

Stock's Rapid Decline in 2023

Since the beginning of the year, First Republic's stock has lost nearly 97% of its value, making it the worst-performing S&P 500 stock. The San Francisco-based lender's stock has halved in value this week alone.