First Republic’s Slide and What It Means for Banks

First Republic received more than $30 billion in money from other banks earlier this month in order to stabilize the overall banking industry and prevent a run on banks.

The investment has not been enough as First Republic’s stock was down almost 30% on Wednesday during trading after an even worse Tuesday. The stock has been so volatile that trading has been halted on and off all week. The bank’s deposit losses were even worse than the market had expected with almost a 40% decline in the first quarter, and have likely been drawn down more than 50% by this time given the news headlines.

The bank has been negatively impacted by Silicon Valley Bank’s collapse due to perceived similarities.

As the bank looks to regroup, it is turning to the eleven banks that provided the first $30 billion with what will amount to a sobering pitch: the collapse of the bank could mean difficulty across the board for small and midsize banks. However, the bank cannot offer a fire sale for its assets as it would not help the overall picture.

The picture looks bleak for present shareholders as most analysts are projecting the only way out could be a dilution of shares. Analysts are watching to see if the news effects other banks even while some banks have reported great first quarter results due to interest rates.

Community banks with healthy balance sheets should get out ahead of the story for the remainder of the week to boost confidence for its customers.