First Republic (FRC) shares turned sharply lower Friday, and were halted from trading on the New York Stock Exchange, amid reports that federal regulators are looking for rescue solution that would involve sending the lender into receivership.
CNBC reported Friday that the Federal Deposit Insurance Corporation (FDIC) is exploring a way in which First Republic can be sold to another U.S. bank, but added that a sale would involve taking the lender into receivership and having its assets and franchise were transferred to the eventual buyer.
The report noted that officials were still hopeful of a so-called 'open markets' solution, which would not involve a First Republic wind-down, but those prospects appeared to be fading into the weekend.
Purchasing the assets in a receivership situation gives buyers more leeway in terms of picking and choosing valuable assets, including loans and mortgages, while an 'open market' solution likely forces the buyer to pay above-market rates for the hundreds of millions in Treasury bonds sitting on First Republic's balance sheet.
Reuters has also reported that Federal Reserve and Treasury officials are working with the FDIC in an attempt to broker a financial lifeline for the bank, which saw deposits fall by more than $100 billion over the first three months of the year.
Earlier this week, Bloomberg reported that the company could divest between $50 billion and $100 billion of its long-dated securities and mortgages as it scrambled to cope with the bigger-than-expected slump in its deposit base and unrealized losses in its fixed income portfolio.
First Republic shares were last seen 37.7% lower at $3.86 each before being halted from trading by NYSE officials, pegging the lender's market value at around $717 million. The stock hit an all-time low of $2.98 each earlier in the session.
Last week, Fitch Ratings said the bank's strategic options would be "very challenging." The credit rating company added that "there's going to be some big write-downs that would have to be taken against some of the assets," given the year-to-date rise in Treasury-bond yields and the discount at which they're likely to be sold. Bond prices and yields move inversely to each other.
First Republic's overall deposits were down $71.9 billion, or 41%, from end-December levels to $104.5 billion over the three months ended in March, First Republic said late Monday. The figure was well below Wall Street forecasts of around $145 billion.
The $104.5 billion total, as well, includes the collective $30 billion that was added to the bank's deposit base by a collection of Wall Street lenders, led by JPMorgan (JPM), following the collapse of Silicon Valley Bank last month.
The figures offset an otherwise solid first-quarter-earnings report. Profit topped analysts' estimates at $1.27 a share while revenue also beat forecasts at $1.21 billion.
