First Republic Bank Down 47% As Search for Buyer Continues

The stocks of the First Republic Bank closed the trading day 47% in the red after being halted more than 10 times to prevent the freefall. The bank entered into a crisis in the midst of the recent closing of three other US banks—Signature, Silvergate, and SVB—and the recent frantic efforts to rescue it have seemingly only made investors and customers warier.

First Republic Bank Shares Half In Monday Trading

The decline of the First Republic Bank started along with the current crisis of confidence in US banks—on March 8th when Silvergate announced its liquidation. The price drop kept becoming more and more pronounced with every subsequent closing—of SVB on the 10th and Signature two days later. The efforts of the government and major banks to come to the rescue have, apparently, only had a delaying effect.

This Monday, First Republic’s shares were halted more than 10 times on the NYSE as they were in a rapid decline throughout the day. Despite these efforts to prevent the freefall, FRC closed a little more than 47% down at $12.80. Allegedly, not only did the bank lose nearly half of the value of its deposits—or about $70 billion—but also a potential buyer, an unnamed major bank, gave up on the acquisition after reviewing the embattled company’s books. 

The federal government has been attempting to stabilize the banking sector since last week with mixed results. Over the weekend, it was even reported that the Biden administration is in talks with the Oracle of Omaha—Warren Buffett—on ways to fully avert the crisis. Buffet notably stepped in during the 2008 crisis to prop up the then-ailing Goldman Sachs with a $5 billion investment.

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Will the FED Pause Inflation Fight to Help Banks Stabilize?

The current turmoil in the banking sector caused widespread speculation about whether the FED will continue raising interest rates as was previously anticipated. After Chair Powell’s testimony two weeks ago, the forecasts started favoring a more aggressive, 50 basis points hike. The fall of three banks in five days, however, sharply altered the predictions.

While most analysts now believe the FED will stay the course, albeit, with a more conservative 25 BPS. For its part, Goldman Sachs now expects a one-meeting pause in the fight against inflation. Still, some see an incoming pivot. Most notably, Nomura currently forecasts that Chair Powell will announce a rate reduction after the next FOMC meeting that is to take place on March 21st and 22nd.

While the question of whether the FED will continue its year-long approach of interest rate increases will remain open until Wednesday, federal authorities did take several steps to alleviate the crisis. Quickly after the closing of Signature, they announced a discount window and by Friday, US banks borrowed a whopping $148 billion from it—the highest amount since the crisis of 2008.

Do you think the FED will pause the hikes or even pivot in the face of the bank crisis? Let us know in the comments below.