First Republic Bank shares fall 50% after reporting dramatic slump in deposits

theguardian.com:

First Republic Bank’s shares closed down 50% on Tuesday, a day after the mid-sized US bank announced a dramatic slump in deposits.

On Monday the San Francisco-headquartered reported a more than $100bn plunge in deposits in the quarter in the aftermath, sparking fears that it could be the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.

Amid the biggest turmoil to hit the banking sector since 2008, the bank now faces tough options to turn around its business with the creation of a “bad bank” or asset sales possibilities, a source familiar with the matter said, after the lender showed the extent of deposit flight during last month’s banking crisis.

“If someone were to acquire them … there’s going to be some big writedowns that would have to be taken against some of the assets given the rate cycle,” Christopher Wolfe, head of North American banks at Fitch Ratings, told Reuters, referring to the bank’s mortgage loan book and securities portfolio.

“The options are very challenging and probably very costly, especially for shareholders,” Wolfe said. “Who’s going to bear the cost?”

First Republic said on Monday it was “pursuing strategic options” to quickly strengthen the bank, without providing details.

The lender was studying all options, a person familiar with the matter said on Monday, speaking on condition of anonymity because the discussions were private.

The source said the bank wanted the US government to help by convening parties that could buoy San Francisco-based First Republic’s fortunes, including private equity firms and big lenders.

Options include an asset sale of up to $100bn, a source familiar with the situation said. Bloomberg News earlier reported the chance of asset sales and said