San Francisco-based First Republic Bank is facing a significant challenge as it seeks to stabilize its finances after reporting a near-41% deposit flight in Q1 2023. The bank’s stock fell sharply on Tuesday and continued to hit new lows on Wednesday, with trading being briefly halted several times. To help shore up its balance sheet, First Republic is reportedly seeking additional aid from other banks, with its advisors attempting to convince large institutions to buy bonds from First Republic at above-market rates for a few billion in losses, or face $30 billion in FDIC fees if the bank fails.
The bank may also explore selling $50 billion to $100 billion in long-term securities and mortgages to reduce its asset-liability mismatch. First Republic is also cutting 20%-25% of jobs in Q2 and is exploring strategic alternatives. The situation has had a knock-on effect on other regional banks, with the SPDR S&P Regional Banking ETF falling on Tuesday and KeyCorp and Zions both falling more than 5%.