Analysis: Is The US’s 3rd Bank About to Collapse as Rumoured?
First Republic Bank, the third-largest bank in the United States, is said to be at risk of collapsing like two other banks in the country, Silicon Valley and Signature.
ph: First Republic Bank
The bank's shares have also fallen dramatically, with a close to 30% drop on April 26, after plunging 49% the day before. The trading in the stock was halted several times over both days due to a rapid drop that resulted in a trigger timeout due to volatility on the New York Stock Exchange. However, even after several banks stepped in with a $30 billion bailout to prevent the First Republic from collapsing, total savings deposits fell by 41% in fund 1 to $104.5 billion.
Moreover, the bank also faces liquidity problems, with about two-thirds of its deposits not FDIC insured when the banking crisis erupted in mid-March. Although this rate is lower compared to SVB's 94%, First Republic had a very high ratio of long-term loans and investments to deposits at the end of last year, according to S&P Global.
In general, experts say that the prospect of First Republic bank is not very good. What is more likely is that the company will try to sell some of its loans and securities for the same price it bought them for. The third option would be worst for shareholders, as the bank could go into receptive mode.
Investors will now anxiously await 4 pm on April 28 to better understand the fate of First Republic. While First Republic has reported that savings activity began to stabilize at the end of the month and has been stable ever since, there is still a looming concern about the possibility of a collapse.
Analysis: Is The US’s 3rd Bank About to Collapse as Rumoured?
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