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US banking crisis fears mount as major lender struggles | |
(about 7 hours later) | |
First Republic says it plans to sell off assets, restructure its balance sheet, and lay off staff | First Republic says it plans to sell off assets, restructure its balance sheet, and lay off staff |
Shares in First Republic Bank plunged another 30% on Wednesday following a wipeout one day previously, after the struggling US lender revealed that depositors had withdrawn more than $100 billion in the first quarter. | Shares in First Republic Bank plunged another 30% on Wednesday following a wipeout one day previously, after the struggling US lender revealed that depositors had withdrawn more than $100 billion in the first quarter. |
The bank’s stock dropped 49% on Tuesday after the San Francisco-based lender disclosed that it had lost 40% of its deposits, fueling fears of further bank collapses in the US. | The bank’s stock dropped 49% on Tuesday after the San Francisco-based lender disclosed that it had lost 40% of its deposits, fueling fears of further bank collapses in the US. |
The concerns follow the failures of Silicon Valley Bank and Signature Bank in March, leaving the US banking sector facing its biggest crisis of confidence since the 2007-2008 financial crash. | The concerns follow the failures of Silicon Valley Bank and Signature Bank in March, leaving the US banking sector facing its biggest crisis of confidence since the 2007-2008 financial crash. |
“Investors got a sharp reminder on Tuesday that the US banking crisis and broader credit crunch are not over,” the chief US economist at Gavekal Research, Will Denyer, commented. | “Investors got a sharp reminder on Tuesday that the US banking crisis and broader credit crunch are not over,” the chief US economist at Gavekal Research, Will Denyer, commented. |
First Republic is considering “strategic options” to raise capital and avoid being seized by US regulators, according to media reports. A source familiar with the matter told Yahoo Finance that a bailout plan would require assistance from the US government. | First Republic is considering “strategic options” to raise capital and avoid being seized by US regulators, according to media reports. A source familiar with the matter told Yahoo Finance that a bailout plan would require assistance from the US government. |
“There is an open bank path solution here, but it’s a matter of the government needing to convene to bring all the parties together to make it happen,” he said. | “There is an open bank path solution here, but it’s a matter of the government needing to convene to bring all the parties together to make it happen,” he said. |
The recovery plan will reportedly include the sale of unprofitable assets and laying off up to a quarter of the lender’s workforce of about 7,200 employees. | The recovery plan will reportedly include the sale of unprofitable assets and laying off up to a quarter of the lender’s workforce of about 7,200 employees. |
However, media reports have highlighted questions surrounding First Republic’s future as an independent lender or possibly as part of a bigger bank. | However, media reports have highlighted questions surrounding First Republic’s future as an independent lender or possibly as part of a bigger bank. |
Christopher Wolfe, head of North American banks at Fitch Ratings, said any potential buyer of First Republic would be looking at a big write-down in the value of the lender’s assets. | Christopher Wolfe, head of North American banks at Fitch Ratings, said any potential buyer of First Republic would be looking at a big write-down in the value of the lender’s assets. |
“The options are very challenging and probably very costly, especially for shareholders,” Wolfe told Reuters. “Who’s going to bear the cost?” | “The options are very challenging and probably very costly, especially for shareholders,” Wolfe told Reuters. “Who’s going to bear the cost?” |
According to CNBC, advisers for the troubled lender will try to persuade some of the 11 banks that provided a $30 billion rescue package last month to buy First Republic’s underwater bonds at above-market rates for a loss of several billion dollars. | According to CNBC, advisers for the troubled lender will try to persuade some of the 11 banks that provided a $30 billion rescue package last month to buy First Republic’s underwater bonds at above-market rates for a loss of several billion dollars. |
For more stories on economy & finance visit RT's business section | For more stories on economy & finance visit RT's business section |
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