Last update: 01 May 2023, 05:42 HST
The First Republic reported total assets of $233 billion as of March 31. Late last year, the Federal Reserve ranked the First Republic 14th among U.S. commercial banks. (Photo: Reuters)
San Francisco-based First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March
Regulators continued their search for a solution to First Republic Bank’s problems over the weekend before stock markets opened on Monday.
The San Francisco-based First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March, with investors and depositors growing concerned that the bank could no longer survive as a independent entity. Shares of the bank closed at $3.51 on Friday, a fraction of the roughly $170 per share it traded a year ago.
Gary Cohn, a former chairman of Goldman Sachs who served as President Donald Trump’s top economic adviser, told CBS News’ “Face the Nation” on Sunday that the Federal Deposit Insurance Corporation “would rather sell the bank in its entirety than by parts “.
“What will most likely happen is that the FDIC will take control and simultaneously resell the asset to the winning bidder,” Cohn said.
Cohn said he thinks it will be a “much faster process” than what happened with Silicon Valley Bank.
The First Republic reported total assets of $233 billion as of March 31. Late last year, the Federal Reserve ranked the First Republic 14th among U.S. commercial banks.
Prior to the failure of Silicon Valley Bank, First Republic had a banking franchise that was the envy of most industry players. His clients – mostly wealthy and powerful – have rarely defaulted on their loans. The 72-branch bank has made much of its money providing low-cost loans to wealthy people, including Meta Platforms CEO Mark Zuckerberg.
Wealthy with deposits from the well-heeled, the First Republic saw its total assets more than double, from $102 billion at the end of the first quarter of 2019, when its full-time workforce was 4,600.
But the vast majority of First Republic’s deposits, like those at Silicon Valley and Signature Bank, were uninsured — that is, above the $250,000 limit set by the FDIC. And that has started to fuel concerns about the franchise among analysts and investors. If the First Republic failed, its depositors might not get all their money back.
These fears crystallized in the bank’s recent quarterly results. The bank said depositors withdrew more than $100 billion from the bank during the April crisis. The San Francisco-based First Republic said it was only able to stem the bleeding after a group of big banks stepped in to save it with $30 billion in uninsured deposits .
Since the crisis, First Republic has been looking for a way to recover quickly. The bank planned to sell unprofitable assets, including the low-interest mortgages it provided to wealthy customers. It also announced its intention to lay off up to a quarter of its workforce, which totaled around 7,200 employees at the end of 2022.
But investors remained skeptical. Bank executives have not answered any questions from investors or analysts since the bank released its results, further sinking the stock.
And it’s hard to restructure a balance sheet profitably when a company needs to sell assets quickly and has fewer bankers to find investment opportunities for the bank. It took years for banks like Citigroup and Bank of America to return to profitability after the global crisis. financial crisis 15 years ago, and these banks had a state safety net to keep them operating.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)
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