Proactive Investors - First Republic Bank (NYSE:FRC) shares fell more than 35% with trading halted multiple times for volatility on Wednesday morning amid reports the government does not plan to intervene to rescue the struggling bank.
Sources told CNBC on Wednesday that government officials were unwilling to intervene in the First Republic rescue process, leaving the bank scrambling to secure its own rescue package.
First Republic is trying to convince some of the large US banks that earlier provided it with a $30 billion cash influx to provide additional support by buying some of the bank’s bonds at above-market rates, according to CNBC.
The sell-off in First Republic shares began after the bank on Monday revealed that its deposits fell by about $100 billion last month, with customers rushing to withdraw cash fearing the bank would fold in the wake of the Silicon Valley Bank collapse.
TickMill Group market analyst James Harte said that the fear now was that the banking sector crisis is not over and has room to worsen.
“If the sell-off in First Republic continues, the bank will once again be knocking on the door of a liquidity crisis raising fears of a collapse and prompting contagion fears around similar lenders,” he said.
“With this in mind, the coming days and weeks will be crucial as traders look to further banking sector 1Q results and monitor the story around First Republic. Notably, if the sell-off does deepen and market focus returns to a potential further banking sector crisis, this might sway market pricing away from expecting a further hike from the Fed in coming weeks.”
After falling more than 35% earlier in the session, First Republic shares were down 30% at US$5.67 late morning on Wednesday.