San Francisco-based First Republic Bank is facing a grim fate as the Federal Deposit Insurance Corporation (FDIC) plans to take over the bank imminently due to its disappointing first-quarter earnings report, according to a report by Fox Business (https://www.foxbusiness.com/markets/fdic-first-republic-bank-takeover-report). The FDIC is reportedly not giving the bank any time to go after a private buyer. In response, big banks such as JPMorgan Chase & Co. and PNC Financial Services Group are expected to bid for the bank after the takeover by FDIC, as reported by Yahoo Finance (https://finance.yahoo.com/news/fdic-approaches-big-banks-buying-135237435.html).
The fallout from the news has caused First Republic Bank’s stock to plummet this week by 75%, further worrying investors who are already on edge about the banking crisis, as reported by CNN (https://www.cnn.com/2022/05/27/business/first-republic-bank-fdic-takeover/index.html) and ABC News (https://abcnews.go.com/Business/banking-crisis-experts-weigh-long-stocks-plunge-connected/story?id=84665476). U.S. officials are currently leading urgent talks to rescue the bank, but private-sector efforts led by the bank’s advisers have yet to yield any results, according to Reuters (https://www.reuters.com/business/us-officials-lead-urgent-rescue-talks-first-republic-2022-05-27/).
The situation could play out in three ways, and two of them are reportedly terrible for shareholders, according to an article in Fortune (https://fortune.com/2022/05/27/first-republic-bank-collapse-stock-price-fdic-buyout/). The meltdown of First Republic Bank could signal a worsening banking crisis after a bank run on SVB in mid-March, per the article. However, the troubles seem to be contained within the bank itself, as the S&P 500 and an index of bank stocks were higher, according to The New York Times (https://www.nytimes.com/2022/05/27/business/first-republic-bank-stock-fdic.html).
Overall, the fate of First Republic Bank remains uncertain as the FDIC takeover looms and big banks prepare to bid for the troubled bank. The situation highlights the ongoing challenges faced by the banking sector, especially in the wake of the pandemic.
