First Republic Bank (NYSE: FRC) is teetering on receivership as shares closed at around $3.51 today, a loss of 43%, only to sink further in after-hours trading, hitting $1.86 – losing another 47%.
Earlier this year, First Republic shares traded at OVER $147 worth billions of dollars. Today, First Republic’s market cap is around $653 million displaying a profound destruction of value.
First Republic is one of several banks that have been hampered by a blitz of deposit exits and questions about a viable future. The current uncertainty does not help with expectations for its future. Rumblings are that the FDIC will soon move in and take over the bank.
First Republic is another example of a bank that mismanaged its interest rate risk. As rates moved rapidly higher, the bank did not adjust its portfolio to mitigate the plunging value of debt instruments.
Earlier today, the US Federal Reserve published a report as to how Silicon Valley Bank failed. Few surprises were in the report as it was a perfect storm of bank incompetence and supervisory failure. New, stricter rules will be forthcoming. Of course, this will be too late to fix the current crisis – and the next crisis is certain to be caused by different circumstances.
