U.S. bank First Republic shares tumbled Tuesday after its depositors withdrew about $100 billion from it last month amid fears it would be the third bank to collapse after Silicon Valley and Signature.
The San Francisco-based bank said at dawn Tuesday that it was only unable to stop the outflow of deposits after a number of big banks stepped in to bail it out and placed thirty billion dollars unsecured, but investors remain highly skeptical about the fate of the deposits. “First Republic”.
It is likely that the bank will fall for years, and in the event of its acquisition, any purchase of it will lead to an immediate loss for the buyer.
The bank says it plans to sell unprofitable assets, including low-interest mortgages to wealthy clients.
The bank also announced plans to cut up to a quarter of its workforce by the end of 2022, which is about 7,200 employees.
“With such a high level of uncertainty around expected results and losses beyond next year, we recommend that investors sell shares as the outlook is very uncertain,” Citibank analyst Arin Tsyganovich said in a note to clients.
The Bank of the First Republic suffered after the collapse of Silicon Valley and Signature Banks in early March, as investors and depositors grew increasingly worried that the bank would not be able to continue as an independent entity for a longer period. The bank’s shares are trading at $9.19, which is several times less than a year ago, when they were worth about $170 per share.
Prior to the collapse of Silicon Valley, the First Republic had a banking privilege that was the envy of most institutions in the banking industry. His clients, most of whom were rich and powerful, rarely defaulted on loans.
The bank made most of its profits by offering low-cost loans to the wealthy, who reportedly include Mark Zuckerberg, CEO of Metaplatform.