Shares of First Republic sink, as banking industry woes flare anew

Government officials, regulators and industry executives are scrambling to craft a solution

By David J. LynchRachel Siegel and Jeff Stein

Shares of First Republic Bank fell sharply Wednesday, continuing an astonishing decline that poses a fresh challenge for the Biden administration and industry regulators. After losing roughly half of their value Tuesday, First Republic’s shares fell by an additional 30 percent Wednesday. San Francisco-based First Republic, which has a wealthy clientele, peaked at $147 per share in early February before the failure in mid-March of two other midsize banks threatened to ignite a wider financial contagion. By late Wednesday morning, its share price had dipped below $5 before rebounding to close at $5.69….“They’re going to have to intervene — I don’t think they can sell it,” said one banking source who was familiar with the ongoing discussions with senior government officials and spoke on the condition of anonymity. “People have been going through the numbers and there’s been unrecognized losses there. So who is going to eat these losses?” First Republic’s chief problem is the effect of rising interest rates. The bank’s funding costs are rising, as it must pay more to acquire and keep deposits, while its earnings from low-yielding securities and loans remain the same, according to Karen Petrou, managing partner of Federal Financial Analytics, a Washington consultancy. “This is what happened to the [savings-and-loans institutions] in the 1980s: The cost of deposits rises and the bank has a large portfolio of lower-rate loans or securities. The cost of doing business becomes higher than the return they can realize,” she said.