The future of First Republic Bank (NYSE:FRC) was once again in the spotlight after reports regulators in Washington and financiers on Wall Street were scrambling to come up with a plan to stabilise the ailing bank.
The California-based lender’s stock price, which has fallen more than 93% this year, fell by a further 49% yesterday, a day after it revealed its customers had withdrawn US$100bn of deposits during last month’s turmoil.
The tumble came as executives refused to take questions from analysts and withdrew financial guidance for the rest of the year.
First Republic on Monday said it was pursuing “strategic options”, but a report in the Financial Times cited multiple people briefed on the situation saying it was struggling to come up with a viable solution, such as a sale of all or part of the bank.
Further, Reuters reported the bank has been sued by shareholders who accused the beleaguered regional bank of concealing how rising interest rates threatened its business model by prompting an exodus of deposits.
The lawsuit filed late Monday in San Francisco federal court accused First Republic and its auditor KPMG of misrepresenting the strength of the bank's balance sheet and liquidity.
The FT said the bank was in touch with the US government, which is on high alert following the failure of Silicon Valley Bank and Signature Bank last month.
Options being discussed included a rescue deal from one the large US banks that recently deposited US$30bn into First Republic or for the Federal Deposit Insurance Corporation to take control of the institution and offer a government guarantee for all deposits, as it did with SVB.
The concern is that the crisis could once more spread to other US regional banks although there are some signs that this may not be the case.
Shares in PacWest, a California bank that has been under pressure since SVB’s collapse, jumped 16.2% in after-hours trading Tuesday after it reported US$1.8bn in deposit inflows since March 20.
The bank said deposits fell more than 16% during the first quarter to roughly US$28.2bn but that recently it had seen deposit inflows including US$700mln in April.
Regional banks have been under pressure since the collapse of SVB and shares in KeyCorp (NYSE:KEY), Zions Bancorp and Fifth Third Bancorp (NASDAQ:FITB) all lost more than 5% on Tuesday in the US.